Nvidia Hit with SEC-Supported Crypto Lawsuit
Nvidia faces a revived class-action lawsuit backed by the SEC, accusing the company of misleading investors about its crypto-related revenue.
Nvidia is facing increased scrutiny as the SEC and DOJ support a revived class-action lawsuit against the company, accusing it of misleading investors about its revenue from cryptocurrency mining. The US government’s involvement aims to reinstate the 2018 lawsuit and hold Nvidia accountable for allegedly downplaying its crypto-related earnings.
In an amicus brief filed on October 2, Solicitor General Elizabeth Prelogar and SEC lawyer Theodore Weiman argued that the case contains sufficient evidence to continue. They claimed Nvidia’s executives, including CEO Jensen Huang, understated the company’s dependence on crypto mining sales, especially during a time when demand for GPUs in mining was booming. They emphasized that private lawsuits are vital for enforcing securities regulations, making this case significant for the broader market.
The Ninth Circuit Court of Appeals had dismissed the lawsuit in 2021 for lack of evidence. However, a split decision in August 2023 revived the case after further review. Investors allege that before the 2018 crypto crash, Nvidia misrepresented its reliance on revenue from mining, making Huang’s public statements misleading and potentially fraudulent.
The investors claim that Nvidia misled them about its financial health by failing to disclose how much of its income depended on the volatile crypto market. After the 2018 market crash, the company’s revenue fell sharply, which exposed the lack of transparency. They argue that Huang was aware of this but downplayed it publicly. In their defense, Nvidia stated that the investors were misinformed about its revenue sources, but testimony from former employees suggests Huang was directly involved in discussions about the company’s dependence on crypto sales.
The DOJ and SEC’s involvement strengthens the lawsuit, adding credibility to the investors’ claims. They argue that the evidence presented is adequate to infer dishonesty or intent, which would have serious implications under the Private Securities Litigation Reform Act (PSLRA). To show their commitment, the agencies requested 10 minutes of oral argument time when the Supreme Court hears the case in November.
This lawsuit could have major legal implications for Nvidia and set a precedent for how crypto-related revenue is reported by other companies, making it a landmark case for investor protection.
