The US Supreme Court on Wednesday sidestepped a decision on whether to allow shareholders to proceed with a securities fraud lawsuit accusing artificial intelligence chip maker Nvidia of misleading investors about how much of its sales depended on the market cryptocurrency volatile.
The judges, who heard arguments in the case in November. 13, dismissed Nvidia’s appeal of a lower court ruling that allowed a 2018 class action — litigation led by Stockholm-based investment management firm E. Ohman J: or Fonder AB — to move forward.
The Supreme Court decided not to resolve the underlying legal dispute, ruling that the case should not have been approved.
Her action upholds the lower court’s decision.
The Supreme Court’s dismissal came with a one-line order that gave no explanation.
During the debates, some of the judges expressed reservations about intervening in this case.
They questioned whether there was a clear legal issue for them to decide, as opposed to a factual dispute, and indicated that they were not ideally placed to resolve the issue given its technical complexity.
At issue was whether the plaintiffs cleared the statutory bar to bringing private securities fraud lawsuits imposed under a 1995 federal law called the Private Securities Litigation Reform Act that was intended to control litigation frivolous.
The plaintiffs accused Nvidia and its CEO Jensen Huang of violating a 1934 federal law called the Securities Exchange Act by making statements in 2017 and 2018 that falsely understated how much of Nvidia’s revenue growth came from from crypto-related purchases.
Starting in 2017, as the price of certain cryptocurrencies rose, Nvidia chips became increasingly popular for cryptomining, a process that involves performing complex mathematical equations to secure cryptocurrencies such as bitcoin and ether.
Towards the end of 2018, amid a decline in crypto profitability, Nvidia’s revenue fell short of its forecasts, causing its stock price to plummet in early November of that year.
The plaintiffs accused Nvidia and its top officials of concealing the impact of cryptomining on its business.
The lawsuit seeks unspecified monetary damages in part to recover the lost value of Nvidia stock held by investors.
Nvidia in 2022 agreed to pay $5.5 million to US authorities to settle allegations that it failed to properly disclose the impact of cryptomining on its gaming business, but without admitting or denying federal regulators’ findings.
A federal judge dismissed the shareholders’ lawsuit, but the San Francisco-based 9th U.S. Circuit Court of Appeals later revived it. The 9th Circuit found that the plaintiffs had adequately alleged that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing their case to proceed.
Deepak Gupta, who represented shareholders before the Supreme Court, called the dismissal “a victory for corporate accountability”.
“Corporate Supreme Court counsel, supported by the U.S. Chamber of Commerce (of Commerce) and its allies, often tries to settle non-existent legal issues in an effort to shrink class actions,” Gupta said. “Hopefully the court will think twice the next time a corporation uses the same playbook.”
An Nvidia spokesperson said the company is “fully prepared to continue our defense.” Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them,” the spokesperson said.
Nvidia argued in the Supreme Court that the plaintiffs had not adequately shown that the challenged corporate statements were false, or the company intentionally or recklessly misled investors, as required by law.
The plaintiffs countered that their lawsuit contained strong enough allegations — gleaned from former employees, market analysis and expert opinion — to survive Nvidia’s motion to dismiss and proceed to the discovery phase of the litigation.
President Biden’s administration supported shareholders in this case.
The Nvidia dispute was one of two cases set to go before the Supreme Court in November involving the right private litigants to hold companies accountable for alleged securities fraud.
The other, involving Meta’s Facebook, was debated in November. 6 and was similarly dismissed by the judges in November. 22.
#Supreme #Court #rejects #Nvidias #appeal #dismiss #shareholder #fraud #suit
Image Source : nypost.com