The U.S. Supreme Court agreed on Monday to review Nvidia’s attempt to dismiss a securities fraud lawsuit alleging that the artificial intelligence chipmaker misled investors about the extent of its sales tied to the volatile cryptocurrency market.
The justices decided to take up Nvidia’s appeal following a lower court’s decision to revive a proposed class action brought by shareholders in California against the company and its CEO, Jensen Huang. The lawsuit, led by Stockholm-based investment management firm E. Ohman J
Fonder AB, seeks unspecified monetary damages.
Santa Clara, California-based Nvidia (NASDAQ:NVDA) has seen a significant increase in market value due to its success in the AI sector. In 2018, Nvidia’s chips gained popularity for cryptomining, a process involving complex mathematical calculations to secure cryptocurrencies like Bitcoin.
The plaintiffs in the 2018 lawsuit accused Nvidia and its top officials of violating the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that downplayed the impact of crypto-related purchases on the company’s revenue growth. These omissions, according to the plaintiffs, misled investors and analysts interested in the influence of cryptomining on Nvidia’s business.
U.S. District Judge Haywood Gilliam Jr. dismissed the lawsuit in 2021. However, the San Francisco-based 9th U.S. Circuit Court of Appeals revived it in a 2-1 ruling, finding that the plaintiffs had adequately alleged that Huang made “false or misleading statements knowingly or recklessly,” allowing the case to proceed.
Nvidia argued that the 9th Circuit’s ruling could lead to “abusive and speculative litigation” and urged the justices to review the appeal. In 2022, Nvidia agreed to pay $5.5 million to U.S. authorities to settle charges related to failing to disclose the impact of cryptomining on its gaming business.
Additionally, on June 10, the justices agreed to hear a similar case involving Meta Platforms Inc.’s Facebook. The social media giant seeks to dismiss a securities fraud lawsuit accusing it of misleading investors in 2017 and 2018 about the misuse of user data by the company and third parties. Facebook’s appeal follows a lower court’s decision to allow a shareholder lawsuit led by Amalgamated Bank to proceed.
The Supreme Court will hear the cases involving Nvidia and Facebook in its next term, starting in October.
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