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US Supreme Court to hear Nvidia bid to avoid shareholder lawsuit
By John Kruzel
WASHINGTON (Reuters) – The U.S. Supreme Court agreed on Monday to hear a bid by Nvidia to dismiss a securities fraud case that accuses the artificial intelligence chipmaker of misleading investors about how much of its sales went to the volatile cryptocurrency industry.
The justices accepted Nvidia’s appeal filed after a lower court revived a proposed class-action lawsuit filed by shareholders in California against the company and its CEO, Jensen Huang. The suit, led by Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB, seeks unspecified monetary damages.
Nvidia, based in Santa Clara, California, is a high-profile company that has become one of the biggest beneficiaries of the AI boom, and its market value has soared.
In 2018, Nvidia chips became popular for cryptomining, a process that involves running complex mathematical equations to secure cryptocurrencies like bitcoin.
Plaintiffs in a 2018 lawsuit accused Nvidia and the company’s top officials of violating a U.S. law called the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that falsely understated how much of Nvidia’s revenue growth came from purchases related to cryptography.
These omissions misled investors and analysts interested in understanding the impact of cryptomining on Nvidia’s business, the plaintiffs said.
U.S. District Judge Haywood Gilliam Jr. dismissed the lawsuit in 2021, but the San Francisco-based 9th U.S. Circuit Court of Appeals, in a 2-1 decision, later revived it. The 9th Circuit concluded that the plaintiffs adequately alleged that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing the case to proceed.
Nvidia urged the justices to grant its appeal, arguing that the 9th Circuit’s decision would open the door to “abusive and speculative litigation.”
Nvidia in 2022 agreed to pay US$5.5 million to US authorities to resolve allegations of failing to adequately disclose the impact of encryption on its gaming business.
The justices agreed on June 10 to hear a similar proposal from Meta’s Facebook to dismiss a private securities fraud lawsuit that accused the social media platform of misleading investors in 2017 and 2018 about the company’s misuse of its user data. and third parties. Facebook appealed after a lower court allowed a shareholder lawsuit led by Amalgamated Bank to proceed.
The Supreme Court will hear the Nvidia and Facebook cases in its next term, which begins in October.
(Reporting by John Kruzel; Editing by Will Dunham)