The U.S. Department of Justice and Securities and Exchange Commission have urged the Supreme Court to move forward with the Nvidia securities fraud case.
In an amicus brief dated Oct. 2, U.S. Solicitor General Elizabeth Prelogar and SEC senior attorney Theodore Weiman expressed the government’s interest in the Nvidia matter, as it pertains to the requirements for “pleading falsity and scienter in private securities-fraud class actions under the Private Securities Litigation Reform Act of 1995.”
Both entities contended that the class action provided “adequate details” to justify reopening the case despite an earlier dismissal by the court in 2021, asserting that the Supreme Court should allow its revival by an appellate court.
“The United States therefore has a strong interest in the proper construction of the PSLRA and has previously participated as amicus curiae in cases regarding the interpretation and application of the PSLRA.”
The U.S. Department of Justice
Additionally, on the same day, 12 former SEC officials submitted a different amicus brief supporting the class action suit. This brief underscored the significance of private enforcement of federal securities laws to the integrity of U.S. capital markets.
They also asserted that Nvidia’s arguments against the lawsuit required the class group to have access to “internal company documents and databases before discovery, and to preclude the use of experts at the pleading stage.” The former officials emphasized that “neither is supported by law or sound policy.”
Nvidia faces allegations of crypto misrepresentation
Moreover, on Oct. 2, six additional amicus briefs in favor of the class group were filed by quantitative analysts, law professors, institutional investors, the American Association for Justice, and the Anti-Fraud Coalition.
The class action lawsuit against Nvidia and its CEO, Jensen Huang, originated in 2018. Plaintiffs accused Nvidia of providing inaccurate information to investors regarding the segment of its sales related to crypto activities.
The plaintiffs alleged that the company breached the U.S. Securities Exchange Act of 1934 by making materially false or misleading public declarations about the extent to which Nvidia’s sales revenues were influenced by crypto mining.
This lawsuit was dismissed in 2021, but was reinstated by a 2-1 ruling from the Ninth U.S. Circuit Court of Appeals based in San Francisco. In 2022, Nvidia opted to settle charges with U.S. authorities by agreeing to pay $5.5 million. These charges claimed that the company failed to adequately disclose the impact of crypto mining on its gaming division.
Following this, during a second-quarter earnings call in 2022, Nvidia executive vice president Colette Kress revealed the company’s decision to completely exit the crypto sector due to a significant drop in revenue related to their crypto affairs.
Nvidia had anticipated generating over $400 million in 2018 from its crypto-mining hardware sales, but ultimately achieved only 18% of that projected revenue.
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