The United States Court has denied Nvidia’s request to dismiss a crypto-related class-action lawsuit, allowing the matter to proceed in lower courts.
The lawsuit accuses Nvidia of misleading investors on how much of its revenue comes from cryptocurrency mining, a key issue dated back in 2018.
Nvidia moved to halt the action, citing provisions in the 1995 Private Securities Litigation Reform Act that aim to minimize frivolous cases. However, the court decided not to interfere, affirming an earlier appeal court decision.
The Biden administration supported the investors in this lawsuit, and Justice Ketanji Brown Jackson stated during previous hearings, “The strength of evidence should be decided during the case, not prior to it.”
In 2018, Nvidia’s stock price dropped 28%. The drop happened because cryptocurrency became less profitable, which hurt Nvidia’s earnings.
Following this, Stockholm, a Swedish investment firm filed a lawsuit. The plaintiffs contend that Nvidia understated its reliance on cryptocurrency mining for revenue growth, which they believe violates the 1934 Securities Exchange Act.
The lawsuit claims Nvidia misled investors in 2018 by downplaying how much cryptocurrency mining contributed to its GPU sales. While the company promoted its GPUs mainly for gaming, a large part of sales reportedly came from the unstable crypto mining market.
In 2022, Nvidia paid a $5.5 million fine to the SEC over similar accusations. The SEC said Nvidia didn’t clearly disclose its dependence on crypto mining and didn’t expect the company to admit any wrongdoing.
Nvidia argued that the investors’ lawsuit had no basis and should be dismissed. The company claims the plaintiffs didn’t provide enough evidence under strict legal standards of the Private Securities Litigation Reform Act.
However, lower courts disagreed. The Ninth Circuit Court of Appeals brought the case back after a district judge initially dismissed it.
Meanwhile, Nvidia faces another challenge as Chinese authorities launched an investigation into possible anti-monopoly violations. Despite these issues, Nvidia’s dominance in the AI chip market has boosted its stock by 180% this year.
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