A shareholder lawsuit alleged the company withheld information from investors about its exposure to cryptocurrencies.
The Supreme Court agreed on June 17 to hear a case from Silicon Valley giant Nvidia that could make it more difficult for shareholders to pursue securities fraud lawsuits.
The case comes after Nvidia agreed in May 2022 to pay the U.S. Securities and Exchange Commission (SEC) $5.5 million to resolve civil charges that the company failed to properly disclose the impact of cryptocurrency mining on its gaming operations. In two quarters in fiscal 2018, the company did not disclose that crypto-mining was a “significant element” of its revenue growth from sales of chips made for gaming, the SEC said.
The justices granted the petition for certiorari, or review, in Nvidia Corp. v. E. Ohman J:or Fonder AB in an unsigned order. No justices dissented. The Court did not explain its decision. At least four of the nine justices must vote to grant a petition for it to advance to the oral argument stage.
Nvidia is a high-tech company known for its graphics processors commonly used in artificial intelligence development, based in Santa Clara, California. E. Ohman J:or Fonder AB is an investment management firm in Stockholm, Sweden.
Investors sued Nvidia claiming the company misrepresented how dependent it was on revenue from mining for volatile cryptocurrency mining before a market setback in 2018. The company argues that the legal complaint filed against it lacks sufficient specificity to move forward.
A lower court resurrected the proposed class action lawsuit brought by shareholders in California and the Swedish firm against the company. Those suing alleged that Nvidia and senior company officials violated the federal Securities Exchange Act of 1934 by making statements that downplayed how much of the company’s revenue growth grew out of crypto-related transactions.
Those omissions misled market participants who wanted to understand the impact of crypto-mining on the company’s business, the plaintiffs argued.
U.S. District Judge Haywood Gilliam Jr., an appointee of President Barack Obama, threw out the lawsuit in 2021 but a divided U.S. Court of Appeals for the 9th Circuit reinstated it. The circuit court determined that the plaintiffs had adequately alleged the company’s CEO made “false or misleading statements and did so knowingly or recklessly,” and permitted the case to go ahead.
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