U.S. Supreme Court Urged to Proceed with Nvidia Crypto Lawsuit

Officials from the U.S. Department of Justice and the Securities and Exchange Commission have urged the U.S. Supreme Court to allow a class action lawsuit against Nvidia to proceed. Accusing the tech giant of misleading investors about the impact of cryptocurrency mining on its 2017-2018 revenues.

Details from the Amicus Brief

The amicus brief, filed by U.S. Solicitor General Elizabeth Prelogar and SEC senior lawyer Theodore Weiman. Supports the claim that Nvidia misrepresented the sources of its revenue growth during the cryptocurrency boom. The company is alleged to have attributed significant revenue increases to gaming while underreporting the substantial contributions from crypto mining activities.

Evidence of Misrepresentation

Evidence presented in the brief includes firsthand accounts from former Nvidia employees. One insider, referred to as FE 1, claimed that Nvidia kept a global database to monitor GeForce GPU sales specifically to crypto miners. Another insider, FE 2, reported that CEO Jensen Huang was directly involved in sales meetings where the impact of cryptocurrency on revenue was discussed.

These accounts suggest that Nvidia’s leadership, including Huang, was fully aware of the significant role that crypto mining played in boosting the company’s sales but chose to downplay this fact in public disclosures.

Economic Analysis and Internal Documents

Further backing the allegations, an economic analysis conducted by Prysm Group indicated that Nvidia’s substantial crypto-related exposure was corroborated by internal documents and a noticeable decline in the company’s revenues following the 2018 crash in cryptocurrency prices. This combination of evidence, according to the DOJ and SEC. Meets the legal standard for “scienter,” or the intent to deceive, which is crucial for advancing the lawsuit.

Legal and Corporate Transparency Implications

The Ninth Circuit Court of Appeals had earlier partially revived the lawsuit after a lower court dismissal in 2021. Which cited insufficient evidence. The amended complaint introduced new details leading to the case’s reinstatement.

The lawsuit highlights the need for greater corporate transparency. Especially regarding how companies disclose emerging market risks like cryptocurrency. The outcome of this case could set a significant precedent for corporate disclosures in rapidly evolving markets.

Current Status and Next Steps

As the legal battle continues, the implications for Nvidia and other tech companies could be substantial. Influencing how risks associated with emerging technologies are reported to investors. The U.S. Supreme Court’s decision on whether to proceed with the case will be closely watched. Potentially reshaping disclosure practices in the tech industry and beyond.