The U.S. Supreme Court agreed on Monday to review a securities fraud lawsuit against Nvidia, which alleges the company misled investors about its involvement in the cryptocurrency industry. This decision comes after a lower court revived the class action lawsuit filed by shareholders in California.
Background of the Case
Nvidia, headquartered in Santa Clara, California, has significantly benefited from the AI boom, with its market value soaring. In 2018, Nvidia’s chips gained popularity for cryptomining, the process of performing complex mathematical equations to secure cryptocurrencies like Bitcoin.
The plaintiffs, led by the Swedish investment management firm E. Ohman JFonder AB, filed the lawsuit in 2018. They accuse Nvidia and its CEO Jensen Huang of violating the Securities Exchange Act of 1934 by making misleading statements in 2017 and 2018 that downplayed the company’s revenue from crypto-related purchases. These omissions allegedly misled investors and analysts about the impact of cryptomining on Nvidia’s business.
Legal Proceedings
U.S. District Judge Haywood Gilliam Jr. initially dismissed the lawsuit in 2021. However, the 9th U.S. Circuit Court of Appeals in San Francisco revived the case in a 2-1 ruling, stating that the plaintiffs had sufficiently alleged that Huang made “false or misleading statements knowingly or recklessly.”
Nvidia has appealed to the Supreme Court, arguing that the 9th Circuit’s ruling could lead to “abusive and speculative litigation.” In 2022, Nvidia agreed to pay $5.5 million to settle charges with U.S. authorities over its failure to properly disclose the impact of cryptomining on its gaming business.
Supreme Court Involvement
The Supreme Court’s decision to hear Nvidia’s appeal follows its agreement on June 10 to review a similar case involving Meta’s Facebook. The Facebook case involves allegations of misleading investors about the misuse of user data in 2017 and 2018. Both the Nvidia and Facebook cases will be heard in the Supreme Court’s next term, beginning in October.
