Nvidia Faces Class-Action Lawsuit Over Alleged Misleading Crypto Sales

Nvidia Faces Class-Action Lawsuit Over Alleged Misleading Information

In a significant legal development, Nvidia is poised to confront a class-action lawsuit that accuses the company of misleading investors regarding the scale of its sales to cryptocurrency miners. This follow-up comes hot on the heels of the United States Supreme Court dismissing Nvidia's appeal to invalidate the case.

Supreme Court Dismissal

On December 11, the Supreme Court issued a brief order dismissing Nvidia's appeal without elaboration on the rationale behind the decision. This ruling effectively reinstates a previous appellate court's ruling that revived the lawsuit, which had been dismissed by a California district court back in March 2021.

The Background of the Lawsuit

The legal action traces back to 2018, initiated by a group of Nvidia shareholders who asserted that the firm concealed over $1 billion in GPU sales directed toward cryptocurrency miners. The complaint claimed that Nvidia's CEO Jensen Huang downplayed the significance of these sales, which later led to a dramatic downturn.

Impact of Cryptocurrency Market

The lawsuit posits that Nvidia's GPU sales were significantly inflated due to the crypto market's popularity. Evidence emerged when sales began to crash in late 2018 parallel to a decline in the cryptocurrency market, resulting in a nearly 30% drop in Nvidia's share price over just two trading days.

Nvidia’s Response

In response to the Supreme Court ruling, an Nvidia spokesperson expressed disappointment, preferring a resolution on the merits that would uphold the trial court's dismissal. They underscored the importance of consistent and predictable standards in the realm of securities litigation to safeguard shareholders and uphold economic stability.

Expert Opinions and Support from Regulatory Agencies

The lawsuit claims reliance on an expert opinion that allegedly misrepresented Nvidia's business and income figures. The situation escalated when, in October, both the Justice Department and the Securities and Exchange Commission (SEC) backed the class group. These agencies argued against Nvidia's assertions, presenting evidence that suggested Nvidia had understated its crypto revenue by approximately $1.35 billion.

Supreme Court Hearings

The Supreme Court's dismissal followed a hearing held on November 13, during which doubts were raised by some justices on whether the court's involvement in the case was necessary.

Nvidia's Previous Settlements

Adding to the ongoing concerns surrounding transparency, in 2022, Nvidia had reached a settlement with the SEC to pay $5.5 million over charges of inadequate disclosure regarding the effects of crypto mining on its gaming business. Notably, this settlement was reached without Nvidia admitting or denying the agency's findings.

Conclusion

The implications of this lawsuit could be far-reaching for Nvidia, especially at a time when the cryptocurrency market's volatility raises significant questions about the future of GPU sales. Investors and analysts alike will be closely monitoring how this legal challenge unfolds, as the stakes continue to rise in the intersection of technology and cryptocurrency.