The justices, who heard arguments on November 13 after earlier deciding to take up the case, dismissed Nvidia’s appeal of a lower court’s ruling that allowed a 2018 class action – litigation led by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB – to move forward.
The Supreme Court opted not resolve the underlying legal dispute, determining that the case should not have been granted. Its action leaves the lower court’s decision in place.
The court’s dismissal came in a one-line order that provided no explanation.
At issue was whether the plaintiffs cleared the heightened legal bar for bringing private securities fraud suits set under a 1995 federal law called the Private Securities Litigation Reform Act that aimed to screen out frivolous litigation.
The plaintiffs accused Nvidia and its CEO Jensen Huang of violating a 1934 federal law called the Securities Exchange Act by making statements in 2017 and 2018 that falsely downplayed how much of Nvidia’s revenue growth came from crypto-related purchases.
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Beginning in 2017, as the price of certain cryptocurrencies rose, Nvidia’s chips became increasingly popular for cryptomining, a process that involves performing complex math equations in order to secure cryptocurrencies such as bitcoin and ether. By late 2018, amid a decline in crypto profitability, Nvidia’s revenue fell short of its projections, leading its stock price to fall in early November of that year.
The plaintiffs accused Nvidia and its top officials of concealing the impact of cryptomining on its business. The suit seeks unspecified monetary damages in part to recoup the lost value of the Nvidia stock held by the investors.
Nvidia in 2022 agreed to pay $5.5 million to U.S. authorities to settle charges that it did not properly disclose the impact of cryptomining on its gaming business, but without admitting or denying the findings of federal regulators.
A federal judge dismissed the lawsuit but the San Francisco-based 9th U.S. Circuit Court of Appeals subsequently revived it. The 9th Circuit found that the plaintiffs had adequately alleged that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing their case to proceed.
Nvidia argued to the Supreme Court that the plaintiffs had failed to adequately show that the disputed corporate statements were false, or the company had intentionally or recklessly misled investors, as required by law.
The plaintiffs countered that their lawsuit contained strong enough allegations – gleaned from former employees, market analysis and expert opinion – to survive Nvidia’s request for dismissal and proceed to the discovery stage of litigation.
President Joe Biden’s administration supported the shareholders in the case.
