In a significant legal development, the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have shown their support in a class-action lawsuit against Nvidia, which faces allegations of deceiving investors.
Recent court documents reveal that both regulatory bodies have filed an amicus brief in favor of Nvidia investors claiming the tech giant misrepresented the influence of cryptocurrency mining on its revenue during 2017 and 2018.
Overview of the Lawsuit
This legal action follows a ruling from the Ninth Circuit Court of Appeals, which revived the case after overturning a lower court’s dismissal in 2021 due to lack of sufficient evidence.
Key Allegations Against Nvidia
According to the lawsuit, investors allege that Nvidia and its CEO, Jensen Huang, misinformed them regarding the company’s heavy reliance on revenue derived from cryptocurrency mining. The plaintiffs argue that Nvidia’s management underplayed its dependency on crypto mining, despite their awareness of its significance. This misrepresentation became evident when the company’s revenue dropped following the 2018 crypto market downturn.
Nvidia’s Defense
In response to these allegations, Nvidia contends that the investors based their claims on misleading information regarding the company’s revenue sources. Despite Nvidia’s assertions, plaintiffs argue that their claims are substantiated by credible sources, including testimonies from former employees. These insiders disclosed that Huang was aware of sales linked to crypto miners and participated in discussions assessing how mining affected revenue.
Legal Implications and Authorities’ Involvement
The Ninth Circuit’s panel has suggested that Huang exhibited the necessary intent, known as “scienter,” to deceive investors, potentially leading to liability. The authorities have highlighted that Huang made numerous public declarations between May 2017 and November 2018 regarding cryptocurrency mining’s impact on NVIDIA’s revenues.
Furthermore, both the DOJ and SEC pointed out that Nvidia agreed to pay a civil penalty of $5.5 million after breaching federal securities laws, which set forth crucial reporting and disclosure standards.
Concluding Remarks From Authorities
In light of their findings, the officials stated:
“The observed correlation between crypto-mining demand and NVIDIA’s commercial success contradicts Huang’s earlier public statements that crypto mining was merely a ‘small’ segment of NVIDIA’s business.”