Just In: Nvidia Crypto Lawsuit Advances As Supreme Court Rejects Appeal

The Supreme Court has rejected Nvidia’s appeal to block a class-action lawsuit, allowing the case to proceed. This lawsuit accuses the microchip company of misleading investors about its revenue reliance on cryptocurrency mining, a controversial issue from 2018.

Nvidia Lawsuit Advances As Supreme Court Rejects Appeal

The U.S. Supreme Court dismissed Nvidia’s appeal on Wednesday, allowing the class-action lawsuit to continue in lower courts. Nvidia sought to block the case, citing protections under the 1995 Private Securities Litigation Reform Act designed to limit frivolous lawsuits. However, the court opted not to intervene, upholding a previous appellate court ruling.

The lawsuit was initiated by a Swedish investment management firm after Nvidia’s stock price fell by 28% in 2018. The drop occurred following the decline in cryptocurrency profitability, which affected Nvidia’s revenues. The plaintiffs claim that Nvidia downplayed the extent of its dependency on cryptocurrency mining for its revenue growth, which they argue violates the 1934 Securities Exchange Act.

The Biden administration supported the investors in this case, and Justice Ketanji Brown Jackson commented during earlier hearings,

“The strength of evidence should be decided during the case, not prior to it.”

Background of the Lawsuit

The class-action lawsuit stems from Nvidia’s 2018 revenue reports, which investors claim misrepresented the role of cryptocurrency mining in driving sales of its graphics processing units (GPUs).

At the time, the company marketed these GPUs primarily for gaming, while a significant portion of sales was reportedly linked to the volatile cryptocurrency mining market.

In 2022, Nvidia settled with the U.S. Securities and Exchange Commission (SEC) by paying a $5.5 million fine over similar allegations. The SEC found that the firm failed to adequately disclose its reliance on cryptomining in its revenue disclosures but did not require the company to admit wrongdoing.

Nvidia’s Response and Current Challenges

The firm has argued that the investors’ lawsuit lacked merit and should be dismissed. The company maintained that plaintiffs did not provide sufficient evidence under the strict standards of the Private Securities Litigation Reform Act.

However, lower courts disagreed, and the Ninth Circuit Court of Appeals revived the case after it was initially dismissed by a district judge.

Adding to Nvidia’s legal concerns, Chinese authorities recently announced an investigation into the company for potential violations of anti-monopoly laws. This new challenge comes as Nvidia remains a dominant player in the artificial intelligence chip market, which has driven its stock price up by 180% this year despite legal and regulatory setbacks.