US Justice Department and SEC Support Investor Lawsuit Against Nvidia

Class-Action Lawsuit Against Nvidia

The United States Justice Department and the Securities and Exchange Commission (SEC) have expressed their support for a class-action lawsuit against Nvidia, a tech company, filed by its investors. The lawsuit alleges that Nvidia misrepresented its sales to cryptocurrency miners. This legal dispute between Nvidia and its investors has been ongoing since 2018 and has now reached the Supreme Court.

US Agencies Back the Lawsuit

In an amicus brief submitted on October 2, US Solicitor General Elizabeth Prelogar and SEC senior lawyer Theodore Weiman argued that the lawsuit contained sufficient details to avoid dismissal by a district court. They further urged the Supreme Court to approve its revival by an appeals court. The two agencies expressed a strong interest in the case as it pertains to laws intended to prevent baseless securities-related lawsuits. They emphasized that meritorious private actions are a crucial complement to criminal prosecutions and civil enforcement actions undertaken by the DOJ and SEC.

Investor Group's Allegations Against Nvidia

The investor group initiated a lawsuit against Nvidia in 2018, accusing the company of concealing over $1 billion in GPU sales to cryptocurrency miners. They alleged that Nvidia's CEO, Jensen Huang, downplayed the company's sales to the industry. The group further claimed that Nvidia's sales were bolstered by miners, a fact that became evident when the company's sales plummeted alongside the crypto market in 2018. The case was initially dismissed, but the group appealed the decision, leading to its revival by the Ninth Circuit appeals court in August. Nvidia subsequently petitioned the Supreme Court to overturn this decision.

DOJ and SEC Rebut Nvidia's Claims

Nvidia argued that the lawsuit was based on an expert opinion that fabricated information about its business and income. However, the DOJ and SEC countered this claim, stating that this was not the case. The agencies also acknowledged the investors' refutation of Nvidia's claims, which purportedly included evidence from former Nvidia executives and a Bank of Canada report alleging that the company understated its crypto revenue by $1.35 billion. Nvidia has declined to comment on the DOJ and SEC brief.

Support from Former SEC Officials and Others

In a separate amicus brief submitted on the same day, 12 former SEC officials expressed their support for the investors. They asserted that private enforcement of federal securities laws is crucial for the integrity of US capital markets. They criticized Nvidia's arguments, claiming that they would establish rules requiring plaintiffs to possess internal company documents and databases before discovery and to preclude the use of experts at the pleading stage. Six additional amicus briefs supporting the investor group were filed on October 2, submitted by quantitative experts, legal professors, institutional investors, the American Association for Justice, and the Anti-Fraud Coalition.

Bottom Line

This case highlights the complexities and challenges involved in the intersection of technology, finance, and law. It raises important questions about transparency and accountability in the tech industry, particularly in relation to the burgeoning field of cryptocurrency. What are your thoughts on this ongoing legal battle? Do you think the investor group's allegations hold merit? Share your thoughts and discuss this article with your friends. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.