US Government Backs Class-Action Lawsuit Against Nvidia Corp

The US government is stepping in to support investors in a class-action lawsuit against tech giant Nvidia Corp. The Department of Justice and Securities and Exchange Commission are appealing to the Supreme Court to revive a case that accuses Nvidia of misleading investors about its revenue from cryptocurrency mining.

In an amicus brief filed on October 2, Solicitor General Elizabeth Prelogar and SEC senior lawyer Theodore Weiman argued that Nvidia’s executives, particularly Chief Executive Jensen Huang, had understated the company’s reliance on crypto mining revenue during a period of high sales. The brief emphasizes the importance of private actions in securities enforcement and highlights the government’s interest in the case.

The Ninth Circuit Court of Appeals initially dismissed the case in 2021 for lack of evidence, but a split panel decision last August reinstated it upon further review. Investor plaintiffs claim that Nvidia misrepresented its financial health and the extent of its revenue from crypto mining before the 2018 crash. They allege that Huang’s statements were misleading and caused liability for securities fraud.

Nvidia has defended itself by stating that the investors’ claims are based on incorrect information about the company’s revenue sources. However, investors have presented evidence from former employees indicating that Huang was aware of the impact of crypto mining on sales but chose to downplay it publicly. The Third Circuit accepted this testimony, suggesting Huang had a guilty state of mind regarding fraud against investors.

The involvement of the DOJ and SEC adds weight to the investors’ arguments and raises important legal implications. The agencies argue that treating an expert’s view as sufficient evidence for inferring dishonesty could compromise investor safeguards under the Private Securities Litigation Reform Act. They have requested 10 minutes of oral argument time when the case is heard before the Supreme Court.

The outcome of this case could have significant implications for investor protection and corporate transparency in the tech industry. Stay tuned for updates as oral arguments are scheduled for November.