- Nvidia faces a class-action lawsuit over allegedly misleading investors about crypto-related graphics processing unit (GPU) sales, now cleared for trial.
- The suit claims Nvidia concealed $1B in sales, causing a 30% drop in stock price.
- Nvidia denies the allegations, with the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) supporting the shareholders’ case.
- This follows Nvidia’s 2022 SEC settlement over inadequate crypto-related disclosures.
Nvidia, the global leader in graphics processing units (GPUs), faces legal turbulence as a class-action lawsuit alleging it misled investors about sales to cryptocurrency miners. This development comes after the United States Supreme Court dismissed Nvidia’s appeal to have the case thrown out.
On December 11, the Supreme Court declined to elaborate and issued an unsequenced, one-sentence order dismissing Nvidia’s appeal. Their decision resulted in reinstating a prior ruling from the Ninth Circuit Court of Appeals in which their class-action lawsuit was revived over settlement actions that the District Court of California previously dismissed in March of 2021. Having intended that it would change the appeal made by the appellate Court, The company faces an upward fight as this case travels again to trial.
The class-action lawsuit, filed in 2018 by a group of company shareholders, accuses the company of concealing over $1 billion in GPU sales to cryptocurrency miners. The shareholders allege that the company misrepresented the volume of sales to the crypto sector and that CEO Jensen Huang downplayed the significance of this market to investors. The suit cites a dramatic decline in Nvidia’s share price, nearly 30% over two days, following a collapse in crypto-related GPU sales in late 2018.
Nvidia Denies $1.35 Billion Crypto Revenue Claim
An Nvidia spokesperson expressed disappointment in the Supreme Court’s decision, stating: “We would have preferred a decision on the merits affirming the trial court’s dismissal of the case, but we are fully prepared to continue our defence. Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them.”
The company has argued that the lawsuit is based on fabricated information regarding its business and income. The company’s defense contends that it accurately disclosed its financial performance and that the claims made by the shareholders are unfounded.
The shareholders’ case has gained the support of the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). Both of these have filed briefs this October, rejecting Nvidia’s arguments and referring to evidence provided by the plaintiffs. According to various reports, the evidence cited contains testimony from former company executives and a Bank of Canada report that accused the company of underreporting $1.35 billion in cryptocurrency-related revenue.
Nvidia’s Crypto Activities Under Legal Scrutiny
This is not Nvidia’s first brush with legal scrutiny over its crypto-related disclosures. In 2022, it settled with the SEC. It agreed to pay a $5.5 million fine following charges that it had not sufficiently disclosed how cryptocurrency mining was affecting its gaming business. The company neither admitted nor denied the findings in that case.
The Supreme Court’s dismissal follows a November 13 hearing in which some justices questioned why the case was accepted for review. They also questioned whether it presented issues requiring a Supreme Court ruling, signalling scepticism about Nvidia’s appeal.
While the case drags on, Nvidia’s lawyers must prepare themselves for allegations of financial deception and their role in the notoriously erratic crypto mining markets. The case underlines some challenges companies confront operating at the intersection of emergent technologies and traditional financial markets.
This legal fight may set a precedent for how companies reveal the impact of their cryptocurrency activities on their business and will be a critical moment in securities litigation. Investors and industry players alike will be watching the drama unfold.
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