| KEY HIGHLIGHTS: |
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| – Supreme Court Decision: The U.S. Supreme Court dismissed Nvidia’s appeal, allowing a 2018 class-action lawsuit by investors to proceed. The case accuses Nvidia of misleading investors about its reliance on cryptocurrency mining revenue. |
| – Legal and Financial Background: Nvidia’s 2022 $5.5 million settlement with the SEC over related allegations highlighted concerns about corporate transparency but included no admission of wrongdoing. |
| – Broader Implications: The case underscores investor accountability in corporate disclosures, especially in emerging markets like cryptocurrency, and could influence future securities fraud litigation. |
The U.S. Supreme Court has dismissed Nvidia’s appeal to halt a class-action lawsuit accusing the company of misleading investors about its dependence on cryptocurrency mining. The move allows the 2018 lawsuit, led by Swedish investment firm E. Ohman J:or Fonder AB, to continue, signaling a potential shift in how corporate accountability is enforced.
The Supreme Court case involving Nvidia centers on allegations that the company misled investors by underreporting how much of its revenue was tied to cryptocurrency mining, particularly during the 2017 crypto boom. The lawsuit, initiated in 2018 by a Swedish investment firm, claims Nvidia’s failure to disclose this reliance contributed to a dramatic stock decline of 28% when cryptocurrency profitability waned. While Nvidia settled with the SEC in 2022 for $5.5 million over related charges, the company admitted no wrongdoing.
At the heart of the current case is company’s alleged failure to disclose its reliance on crypto-related sales, which skyrocketed during the 2017 crypto boom. As crypto profitability plunged in 2018, Nvidia’s stock dropped 28% following revenue shortfalls, causing significant losses for investors. The lawsuit accuses CEO Jensen Huang of making “false or misleading statements” regarding these dependencies.
Court Rulings and Remarks on Nvidia’s Appeal
The Supreme Court decided it was wrong to take up Nvidia’s appeal after arguments in November 2024. A previous ruling by the Ninth Circuit Court of Appeals allowed the case to move forward, stating that plaintiffs had sufficiently demonstrated Nvidia may have knowingly misled investors.
During arguments, some justices expressed reluctance to intervene, citing the technical complexities of securities law. Justice Ketanji Brown Jackson reportedly questioned whether there was a clear legal issue, emphasizing the role of lower courts in resolving such disputes.
Deepak Gupta, who represented investors, hailed the ruling as a “win for corporate accountability,” adding:
“When corporations mislead shareholders, they undermine trust in our markets. Ensuring that investors can seek justice is essential to preserving fairness and transparency.”
Broader Implications
This decision sets a precedent for securities fraud cases, particularly regarding tech companies. Nvidia argued the case could “open the floodgates” to frivolous lawsuits under the Private Securities Litigation Reform Act (PSLRA) of 1995, designed to screen out baseless claims.
However, the Biden administration supported the investors, reflecting a growing focus on corporate accountability. Nvidia, while expressing readiness to defend itself, warned:
“Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy.”
Other Legal Challenges
The ruling comes amidst Nvidia’s stellar market performance in the AI sector, with shares up 180% this year. However, the company faces scrutiny elsewhere, including an antitrust investigation in China and lawsuits over intellectual property misuse.
The court also dismissed a similar case involving Meta Platforms, linked to the Cambridge Analytica privacy scandal, reinforcing the trend of holding tech giants accountable.
This ruling underscores the heightened scrutiny on corporate practices in an era of rapid technological innovation, reaffirming investor rights while raising the bar for corporate disclosures.
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