The US Supreme Court is preparing to review a major securities fraud case involving Nvidia. The technology company is seeking to have a lawsuit dismissed that accuses it of misleading investors about the impact of Cryptocurrency demand on its revenue, a case that could redefine the requirements for shareholders to sue companies for alleged fraud.
The justices will hear arguments this Wednesday in an appeal by Nvidia against a lower court’s decision that allowed the lawsuit to move forward.
Case Context
The case began in 2018 with a class-action lawsuit led by Swedish investment management firm E. Ohman JFonder AB. The plaintiffs accuse Nvidia and its CEO, Jensen Huang, of violating the Securities Act of 1934 by allegedly making false or misleading statements about the company’s exposure to the cryptocurrency market between 2017 and 2018.
In that period, the value of cryptocurrencies such as Bitcoin and Ethereum increased considerably, boosting demand for Nvidia chips, popular for cryptocurrency Mining.
However, when cryptocurrency prices fell in 2018, Nvidia’s revenue fell short of expectations, and its share price suffered a significant drop. Shareholders allege that Nvidia concealed its business’ dependence on the volatile cryptocurrency market, causing significant losses to investors.
Legal and regulatory implications
The focus of Nvidia’s appeal is whether the plaintiffs meet the strict requirements of the Private Securities Litigation Reform Act of 1995. This law was created to filter out frivolous lawsuits by requiring plaintiffs to prove that the company made false statements. with knowledge or gross negligence.
In a previous ruling, the Ninth Circuit Court of Appeals allowed the case to move forward, finding that the plaintiffs had presented sufficient evidence to allege that Nvidia leaders may have intentionally or negligently made misleading statements.
Possible consequences for corporate responsibility
This case is one of two securities fraud cases on the Supreme Court’s agenda this month, along with one involving Meta (Facebook).
The Court has already limited the authority of the US Securities and Exchange Commission (SEC) in previous rulings, and these two decisions could further restrict the ability of private investors to sue companies. President Joe Biden’s administration has shown its support for shareholders in the Nvidia case, defending their right to litigate under the current legal framework.
Regulatory precedent and its impact on Nvidia
In 2022, Nvidia settled with US regulators, paying $5.5 million without admitting or denying allegations that it failed to adequately disclose the impact of cryptocurrency mining on its revenue.
The Supreme Court could issue a decision for this case in June 2025, which could set an important precedent for corporate responsibility, not only at Nvidia, but also for other technology companies and in the securities regulatory arena.
If Nvidia succeeds in getting the case overturned, this outcome could set a new limit on shareholders’ ability to hold corporations liable in private lawsuits, affecting how investors interpret and evaluate information disclosed by companies in the markets. financial.
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