The US is entering the fray as it supports a class action lawsuit against the manufacturer of graphics processing units, Nvidia Corp. The Department of Justice and Security and Trade is appealing to the Supreme Court to raise the case accusing Nvidia Corp. of misleading investors about income from cryptocurrency mining. This case has been on a rollercoaster ride since it was filed in 2018 and is back on the agenda.
Government Support for Investors
In an amicus brief filed on October 2, Solicitor General Elizabeth Prelogar and SEC senior counsel Theodore Weiman argued that the case has sufficient facts to trigger an action. They said that Nvidia’s management, especially Chief Executive Jensen Huang, has reduced reliance on crypto mining at a time when such sales were through the roof.
The brief emphasizes that private actions are an important part of the securities enforcement effort, giving the government a vested interest in the case. Oral arguments before the Supreme Court are scheduled for November.
The Ninth Circuit Court of Appeals dismissed the case in 2021 for lack of evidence. But in the classification panel’s decision last August, it sent us back for further review. Investors claim that before the 2018 crash, Nvidia had misrepresented how much it relied on crypto mining. Huang’s statements were misleading, thereby creating a liability for securities fraud, they added.
Allegations Against Nvidia
In essence, it claims that the company misled investors about its financial health and failed to make them aware of how much money was generated from the sale of crypto-related currencies on the open market.
According to the claim made by the investors, this lack of transparency became evident after the company’s income dropped significantly following the cryptocurrency crash in 2018. Instead, it suggests that Huang was well aware of how dependent his company was on its crypto sales but chose not to. to degrade the same thing in public.
In their defense, Nvidia said the investors’ claims were based on incorrect information about how the company makes money. But investors pointed to evidence from former employees who said Huang was part of discussions about how crypto mining affected sales. The Third Circuit accepted this evidence, and as a result, Huang was guilty of fraud against the investors.
Legal Implications and Future Actions
The involvement of the DOJ and the SEC gives investors’ arguments more weight. Treating an expert’s opinion as sufficient evidence to show dishonesty or intent, they argue, jeopardizes investor protections set forth under the Private Securities Litigation Reform Act (PSLRA). To demonstrate their commitment to enforcing the securities laws, the agencies requested 10 minutes of oral argument time when the case was heard.
Featured image from Vox, chart from TradingView