The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have supported a class action lawsuit against NVIDIA, accusing it of misleading investors.
According to court filings, the two institutions filed court briefs in support of NVIDIA investors who claim that NVIDIA misrepresented the impact of crypto mining on its 2017/2018 earnings.
The Justice Department and SEC asked the Supreme Court to reinstate the previously dismissed case. Solicitor General Elizabeth Preloger and SEC Senior Counsel Theodore Wyman argued that the lawsuit contains sufficient evidence to proceed.
Officials also requested 10 minutes for oral arguments when the case goes to court in November.
lawsuit
The case follows the Ninth Circuit's decision to reopen the case, overturning a lower court's 2021 dismissal for lack of evidence.
According to the complaint, investors allege that NVIDIA and its CEO Jensen Huang misled them into believing that the company was dependent on revenue related to cryptocurrency mining. They allege that Nvidia's management was well aware of the company's reliance on cryptocurrency mining but downplayed it. The company's vulnerabilities were exposed when its revenue declined after the 2018 cryptocurrency market crash.
Nvidia countered that investors relied on fabricated data about the company's revenue streams. However, investors claim that data from multiple reliable sources points to securities fraud.
These sources included two former NVIDIA employees who revealed that the CEO was aware of the company's sales tracking to crypto miners. It also pointed out that Hwang was present at a meeting where the impact of cryptocurrency mining on the company's revenue was discussed.
On this basis, the Ninth Circuit panel concluded that the CEO acted with the requisite intent, or “scientism,” to mislead investors and could be liable.
U.S. authorities confirmed this, noting that Huang made several public statements between May 2017 and November 2018 about the impact of cryptocurrency mining on NVIDIA's revenue.
They said the company also agreed to sanctions, including a $5.5 million civil penalty, for violating federal securities laws requiring reporting and disclosure requirements.
In view of this, the authorities said:
“The observed correlation between crypto mining demand and NVIDIA’s commercial success belies Mr. Huang’s previous public statements suggesting that crypto mining is only a ‘small portion’ of NVIDIA’s business. It’s a thing.”
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