Written by John Crozel
WASHINGTON (Reuters) – The U.S. Supreme Court on Monday agreed to hear a request from Nvidia Inc (NASDAQ:) to thwart a securities fraud lawsuit accusing the artificial intelligence chip maker of misleading investors about how much of its sales went into the volatile cryptocurrency industry.
The justices accepted 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, led by Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB, seeks unspecified financial damages.
Nvidia, headquartered in Santa Clara, California, is a high-flying company that has become one of the biggest beneficiaries of the AI boom, and its market value has soared.
In 2018, Nvidia chips became popular in cryptocurrency mining, a process that involves performing complex mathematical equations in order to secure cryptocurrencies like Bitcoin.
Plaintiffs in a 2018 lawsuit accused Nvidia and senior company officials of violating a U.S. law called the Securities Exchange Act of 1934 by making statements in 2017 and 2018 that falsely understated how much of Nvidia’s revenue growth came from cryptocurrency-related purchases.
Prosecutors said these omissions misled investors and analysts who were interested in understanding the impact of cryptocurrency mining on Nvidia’s business.
US District Judge Haywood Gilliam Jr. dismissed the suit in 2021, but the San Francisco-based US 9th Circuit Court of Appeals in a 2-1 ruling later revived it. The Ninth Circuit found that plaintiffs sufficiently alleged that Huang made “false or misleading statements and did so knowingly or recklessly,” allowing their case to proceed.
Nvidia urged the justices to grant its appeal, arguing that the Ninth Circuit’s ruling would open the door to “arbitrary and speculative litigation.”
Nvidia in 2022 agreed to pay $5.5 million to US authorities to settle accusations that it did not properly disclose the impact of cryptocurrency mining on its gaming business.
The justices agreed on June 10 to hear a similar bid from Meta’s Facebook (NASDAQ:) to dismiss a private securities fraud lawsuit accusing the social media platform of misleading investors in 2017 and 2018 about the misuse of user data by the company and third parties. . Facebook appealed after a lower court allowed a shareholder-led lawsuit to proceed Mixed bank (NASDAQ:) going forward.
The Supreme Court is scheduled to hear the Nvidia and Facebook cases in its next session, which begins in October.