Nvidia recently encountered a significant defeat in its efforts to dismiss a lawsuit filed by investors. The lawsuit claims that the tech giant misled stakeholders regarding its GPU sales to cryptocurrency miners. On December 11, the Supreme Court issued a one-line order rejecting Nvidia’s appeal, leaving no explanation for its decision. This ruling effectively reinstates an earlier determination by an appellate court that had revived the case, which was dismissed by a California district court back in March 2021.
Legal Background
The legal battle traces back to a 2018 lawsuit initiated by Nvidia shareholders who argue that the company concealed over $1 billion in GPU sales linked to crypto mining activities. Furthermore, they allege that CEO Jensen Huang downplayed the extent of these sales, which were crucial to the company’s revenue during that period.
In response, a spokesperson for Nvidia expressed disappointment that the court chose not to uphold the dismissal based on the merits of the case. However, the representative reiterated the company’s commitment to mounting a strong defense, stressing the necessity for consistent standards in securities litigation to protect investors and support a healthy economy.
Financial Implications
The lawsuit highlights how Nvidia’s GPU sales were heavily driven by sales to crypto miners. It points to a significant decline in revenues that coincided with a downturn in the cryptocurrency market at the end of 2018, which contributed to a sharp drop—nearly 30%—in Nvidia’s share price over just two days.
Nvidia has argued that the claims in the lawsuit are flawed, citing an expert opinion that allegedly contains incorrect data about its financial performance and operations. Notably, in October, both the Justice Department and the Securities and Exchange Commission backed the investors, asserting that Nvidia’s portrayal of its circumstances did not accurately reflect reality.
Regulatory Support and Previous Settlements
Supporting evidence flagged by these regulatory bodies includes testimonies from former Nvidia executives and a report from the Bank of Canada. This documentation suggests that Nvidia may have understated its cryptocurrency-related revenue by around $1.35 billion.
The Supreme Court reached its decision after reviewing arguments on November 13, during which some justices questioned the justification for the court’s involvement and whether the case raised any substantial legal issues requiring a ruling.
Additionally, in 2022, Nvidia reached a $5.5 million settlement with the SEC, resolving allegations that it inadequately disclosed how crypto mining impacted its gaming business. As part of that agreement, Nvidia did not admit to or deny the SEC’s findings.
Source: Cointelegraph
