John Krusel
WASHINGTON (Reuters) – The U.S. Supreme Court agreed on Monday to hear Nvidia’s (NASDAQ:) bid to dismiss a securities fraud lawsuit accusing the artificial intelligence chip maker of misleading investors about how much of its sales went to volatile cryptocurrency industry.
The justices heard Nvidia’s appeal, filed after a lower court revived a proposed class action brought by shareholders in California against the company and its CEO Jensen Huang. The lawsuit, brought by Swedish investment management firm E. Ohman J:or Fonder AB, seeks unspecified monetary damages.
Nvidia, headquartered in Santa Clara, California, is an ambitious company that has become one of the biggest beneficiaries of the artificial intelligence boom, and its market value has soared.
In 2018, Nvidia chips became popular for cryptocurrency mining, a process that involves executing complex mathematical equations to secure cryptocurrencies such as Bitcoin.
Plaintiffs in the 2018 lawsuit accused Nvidia and the company’s top officials of violating a U.S. law called the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that falsely downplayed how much of Nvidia’s revenue growth came from cryptocurrency related purchases.
According to the plaintiffs, these omissions misled investors and analysts who were interested in understanding the impact of cryptomining on Nvidia’s business.
U.S. District Judge Haywood Gilliam Jr. dismissed the lawsuit in 2021, but the 9th U.S. Circuit Court of Appeals in San Francisco, in a 2-1 decision, subsequently reinstated it. The Ninth Circuit found that the plaintiffs had a valid claim that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing their case to proceed.
Nvidia urged the justices to hear its appeal, arguing that the 9th Circuit’s decision would open the door to “abusive and speculative litigation.”
In 2022, Nvidia agreed to pay US authorities $5.5 million to settle allegations that it failed to properly disclose the impact of cryptomining on its gaming business.
On June 10, the justices agreed to consider Facebook’s similar bid to Meta (NASDAQ:) to dismiss a private securities fraud lawsuit accusing the social media platform of misleading investors in 2017 and 2018 about the misuse of its user data by the company and third parties. . Facebook filed an appeal after a lower court upheld a shareholder lawsuit brought by United Bank (NASDAQ:) to continue.
The Supreme Court will hear the Nvidia and Facebook cases in its next term, which begins in October.