US Government Supports Lawsuit Against Nvidia Over Crypto Revenue Misrepresentation
By: Eva Baxter
The United States Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have jointly expressed support for a class-action lawsuit against Nvidia, a leading technology company. The lawsuit alleges that Nvidia misled its investors regarding its dependence on cryptocurrency mining, which significantly impacted its 2017 and 2018 revenue. According to court documents, the DOJ and SEC have submitted an amicus brief, backing Nvidia investors in their claims that the company misrepresented its revenue streams from crypto mining, urging the Supreme Court to revive the dismissed case.
The Ninth Circuit Court of Appeals had previously overturned a lower court's 2021 dismissal of the lawsuit, citing insufficient evidence at the time. Plaintiffs in the lawsuit assert that Nvidia, along with its CEO Jensen Huang, downplayed the role of cryptocurrency mining in the company's revenue, misleading investors who believed the company's earnings were less reliant on this market. The lawsuit further alleges that Nvidia's vulnerability to the cryptocurrency market became evident with the revenue dip following the 2018 crypto market crash.
In response, Nvidia has argued that investors relied on inaccurate data about its revenue sources. However, the suing parties maintain that their data, sourced from reliable channels, suggests otherwise and points to securities fraud. Supporting this claim, two former Nvidia employees have disclosed that CEO Jensen Huang was aware of sales tracking to cryptocurrency mining entities and even participated in discussions regarding their impact on Nvidia's revenue. Given these details, the Ninth Circuit found enough evidence suggesting that Nvidia's CEO acted with intent, or “scienter,” to mislead investors, potentially leading to liability.
The US authorities acknowledged Nvidia's involvement and pointed out that the firm made multiple public statements, including during interviews and earnings calls, between May 2017 and November 2018, discussing the impact of crypto mining on its revenue. Additionally, Nvidia agreed to a civil penalty of $5.5 million for breaching federal securities laws related to reporting and disclosure requirements. The authorities assert that evidence contradicts previous statements by Nvidia’s CEO downplaying crypto mining’s significance in the company's business. For more information on the impact of crypto mining on Nvidia’s performance, visit Nvidia's official site.
