The U.S. Supreme Court has rejected Nvidia’s request to move on from a class-action suit, allowing investors to pursue their claims alleging the tech behemoth misled the market about its GPU sales to cryptocurrency miners. The decision represents a major shift in the ongoing legal battle.
Court’s Decision Affirms Prior Ruling
On Dec. 11, the Supreme Court issued a brief, one-line order denying Nvidia’s appeal, providing no reasoning. In making this decision, the court affirmed an earlier ruling from the Ninth Circuit Court of Appeals in August that had revived the lawsuit after it had been dismissed in 2021 by a California district court.
The suit, which was initially filed in 2018, claims Nvidia hid more than $1 billion in revenue through the sale of GPUs to crypto miners. Shareholders say CEO Jensen Huang and the company understated the importance of cryptocurrency-related sales, which resulted in less-than-transparent financial reporting from Nvidia.
Nvidia Stays on the Offense
Nvidia has denied the allegations, repeatedly claiming the suit is based on untrustworthy expert testimony and invented claims. After the Supreme Court’s decision, a company spokesperson said:
“While we would have preferred a merits decision affirming the trial court’s dismissal of the case, we are ready to continue our defence in full.” Consistent and predictable standards in securities litigation that protect shareholders and a healthy economy remain a goal to which we are dedicated.”
Nvidia, however, is preparing to fight its case in lower courts, arguing that it has followed all regulatory requirements despite the breaking news.
Allegation of Misrepresentation by Shareholders
They argue that the company’s results during the 2017–2018 crypto boom were highly inflated by GPU sales to miners but that Nvidia intentionally downplayed this fact. The so-called overreliance on crypto-related sales was laid bare when Nvidia’s stock value plunged nearly 30% in two days in late 2018 as cryptocurrency demand declined.
The shareholders are said to have submitted supporting evidence, including statements from former Nvidia executives and a report from the Bank of Canada alleging that the company underreported its revenue tied to cryptocurrency activities by $1.35 billion.
Support for Investors by Government Agencies
In October, the lawsuit gained steam when the U.S. Department of Justice and the Securities and Exchange Commission (SEC) submitted briefs in support of the shareholders. The agencies contended that Nvidia’s appeal was without merit and stressed the need to hold corporations responsible for truthful financial disclosures.
“This is not what happened here,” the SEC said in a brief arguing against the company’s assertion that the lawsuit was based on fabricated evidence.
2022 — Nvidia’s SEC Settlement
This legal challenge comes after Nvidia’s earlier battle with regulators. In 2022, the company paid a $5.5 million fine to settle charges from the Securities and Exchange Commission that it had failed to disclose how much crypto mining was affecting its gaming business. As part of the settlement, Nvidia did not admit or deny the findings.
What Does the Future Hold for Nvidia?
The Supreme Court’s decision means that the lawsuit will now go back down to lower courts, where both sides will make further arguments. A win for the shareholders would have major implications for corporate disclosure practices, especially for companies doing business in volatile industries such as cryptocurrency.
And Nvidia, with its super powerful chips that dominate both gaming and artificial intelligence technologies, has seen its boost in business turn into huge financial growth this year. But the result of this court case may, alas, impact its market perception and investors’ confidence.
Implications for the Wider Industry
The Nvidia case reflects increasing regulatory scrutiny over financial reporting related to emerging markets like cryptocurrency. As the case moves forward, this fight could set a ruling that creates a playbook company can follow when trying to fulfil disclosure requirements in fields subject to profound changes in short periods. For Nvidia, this legal challenge serves as a lesson on the importance of transparency in building trust among investors.
