The United States government and the Securities and Exchange Commission (SEC) have thrown their weight behind a class-action lawsuit against Nvidia, urging the Supreme Court to allow the case to proceed. The case, which alleges that Nvidia misled investors by understating its sales to cryptocurrency miners, has been in and out of courts since 2018. Now, the stakes are higher than ever, with the US and SEC backing the plaintiffs in their fight to hold the tech giant accountable.
On October 2, in an amicus brief filed by US Solicitor General Elizabeth Prelogar and SEC senior lawyer Theodore Weiman, both agencies expressed their “strong interest” in the case, arguing that it touches on fundamental laws designed to prevent frivolous securities lawsuits. The brief further noted that “meritorious private actions are an essential supplement to criminal prosecutions and civil enforcement actions” carried out by the US and SEC, highlighting the importance of the case to the future of investor protection.
A Legal Tug-of-War Since 2018
The class-action suit first emerged in 2018, when a group of investors accused Nvidia of misrepresenting its sales figures related to cryptocurrency mining. The plaintiffs argued that Nvidia’s revenue from its graphics processing unit (GPU) sales was propped up by sales to crypto miners—a market segment that the company allegedly failed to disclose. When the cryptocurrency market crashed in 2018, Nvidia’s sales took a sharp nosedive, leading to significant losses for investors.
Nvidia has consistently denied these allegations, claiming that the class-action suit relies heavily on fabricated expert opinions about the company’s business practices. The tech giant petitioned the Supreme Court after the Ninth Circuit Court of Appeals revived the case last August, following an initial dismissal by a district court. But with the US and SEC now stepping in to support the plaintiffs, the dynamics of the legal battle have dramatically shifted.
US and SEC Emphasise the Importance of Investor Protections
Both the US and SEC have made it clear that they view this case as critical to maintaining the integrity of the US financial system. In their joint brief, they pointed out that the case has broader implications for how securities laws are interpreted, particularly when it comes to the role of private investors in holding corporations accountable.
“This is not just about Nvidia,” said one legal expert familiar with the case. “The US and SEC are signalling that they believe private lawsuits are a necessary tool for policing the markets, especially in an era where technology companies are playing an increasingly dominant role.”
The amicus brief from the US and SEC was accompanied by a separate brief filed by 12 former SEC officials, who also backed the plaintiffs. These officials argued that private enforcement of securities laws is vital to ensuring transparency and fairness in the markets. They criticised Nvidia’s legal arguments, claiming that the company’s stance would set a dangerous precedent by requiring plaintiffs to possess internal company documents before discovery, effectively curbing the use of expert testimony at the pleading stage.
“Neither is supported by the law or good policy,” the former SEC officials said in their brief.
Nvidia Faces Mounting Pressure
With support pouring in from multiple quarters, including quantitative experts, institutional investors, and legal scholars, Nvidia is under increasing pressure. In total, six additional amicus briefs were filed on October 2 in support of the class-action suit. These briefs came from prominent groups such as the American Association for Justice and the Anti-Fraud Coalition, all of whom emphasised the need for the Supreme Court to allow the case to proceed.
The US and SEC also rebutted Nvidia’s claim that the suit is based on inaccurate expert analysis, stating that the allegations have substantial backing from former Nvidia executives and a report by the Bank of Canada. This report, they argued, provides credible evidence that Nvidia had understated its cryptocurrency-related revenue by a staggering $1.35 billion.
Despite these mounting allegations, Nvidia has remained tight-lipped about the case. A spokesperson for the company declined to comment on the latest filings from the US and SEC, as well as the involvement of former SEC officials.
Implications for Crypto and Tech Companies
The case against Nvidia holds significant implications for the company and the broader tech and crypto sectors. If the Supreme Court sides with the plaintiffs, it could open the floodgates for more lawsuits against companies accused of misleading investors about their involvement in the volatile cryptocurrency market.
Moreover, the backing of the US and SEC in this case sends a strong message to corporations operating in the US that they are not immune to scrutiny, even if their activities involve cutting-edge technology like cryptocurrency mining. The agencies’ support for the plaintiffs reinforces the idea that securities laws will be vigorously enforced, particularly when it comes to safeguarding investors from financial misrepresentation.
What’s Next?
The Supreme Court is expected to hear oral arguments in the coming months, with legal analysts keeping a close eye on the proceedings. Should the court decide in favour of the plaintiffs, it will revive the class-action suit against Nvidia and set a precedent for how securities laws are applied to companies operating in the rapidly evolving tech and cryptocurrency sectors.
As the legal battle unfolds, the US and SEC remain steadfast in their commitment to investor protection. Their involvement in this case underscores the crucial role that both government and regulatory agencies play in ensuring that corporations are held accountable for their actions, particularly in markets as dynamic and unpredictable as cryptocurrency.
For Nvidia and its investors, the stakes could not be higher. With the US and SEC fully backing the plaintiffs, the company now faces one of the most significant legal challenges in its recent history.
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