THE US Supreme Court dismissed an appeal by Nvidia, leaving it to face a lawsuit that accuses the company of misleading shareholders about its reliance on crypto-mining revenue in the run-up to a market crash.
The dismissal came four weeks after several justices questioned whether the case presented the type of broad legal issue that would warrant a Supreme Court ruling. Nvidia, the world’s most valuable company, contended the shareholders’ lawsuit lacked enough specificity to go forward to the evidence-gathering stage of litigation.
As is its usual practice, the court did not provide any explanation for dropping the case, saying only that it was being “dismissed as improvidently granted”.
The move is a “big win for corporate accountability”, said Deepak Gupta, who represented the shareholders in the Nov 13 argument. “When corporations mislead shareholders, they undermine trust in our markets. Ensuring that investors can seek justice is essential to preserving fairness and transparency.”
Nvidia was appealing a ruling from the San Francisco-based 9th US Circuit Court of Appeals. In letting the suit go forward in a federal district court in Oakland, California, the appeals court had reversed a trial judge’s decision tossing out the case.
“We would have preferred a decision on the merits affirming the trial court’s dismissal of the case, but we are fully prepared to continue our defence,” Nvidia said. “Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them.”
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It’s the second securities fraud case the justices have scrapped in a term that is only two months old. The court last month dismissed an appeal by Meta Platforms, leaving it to face accusations of misleading shareholders about the data-harvesting scandal involving political consulting firm Cambridge Analytica.
Crypto sales
A ruling favouring Nvidia might have helped other companies win early dismissal of shareholder suits and avoid the expense of mounting a full-scale defence. The case centred on the protections Congress gave companies in the 1995 Private Securities Litigation Reform Act, which requires lawsuits to make key allegations “with particularity”.
The Nvidia shareholders said that in 2017 and 2018 chief executive Jensen Huang hid the fact that record revenue growth was being driven by mining-related sales of the company’s flagship GeForce GPU product, rather than by sales for gaming. The chipmaker’s products have become key computer components used to complete the complex calculations to extract cryptocurrencies.
The investors said crypto market volatility put the company in a precarious spot when the market crashed in 2018. The company said in November 2018 that it had missed its revenue projections, sending shares tumbling more than 28 per cent over two days. Huang at the time said a “crypto hangover” was to blame.
The investors are led by a unit of Swedish institutional investor E Ohman J:or AB.
Nvidia in 2020 agreed to pay US$5.5 million to settle related allegations by the Securities and Exchange Commission. BLOOMBERG
