US Supreme Court Blocks Nvidia’s Attempt to Appeal Securities Lawsuit Related to Crypto

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As a seasoned crypto investor with a fair share of ups and downs in my portfolio, this recent development in the Nvidia v. E. Öhman J:or Fonder AB case has piqued my interest. Having weathered through a few market cycles, I’ve learned to be wary when companies attempt to sugarcoat their reliance on volatile sectors like cryptocurrency.

or Fonder AB to unfold in a federal court.

As an analyst, I must acknowledge that the recent decision has significantly impacted Nvidia. We had anticipated a different outcome from the Ninth US Circuit Court of Appeals, hoping they would overturn their previous ruling. In this instance, they chose to uphold the earlier decision, allowing the case against Nvidia’s top leadership, including CEO Jensen Huang, to move forward. The allegations revolve around the misrepresentation of the primary factor driving the company’s substantial revenue growth in 2017 and 2018.

Allegations Against Nvidia

The lawsuit, spearheaded by Swedish investment firm E. Öhman J:or Fonder AB, accuses Nvidia of deceiving shareholders regarding the degree to which it depended on cryptocurrency-related income during the crypto market surge of 2017 and 2018. The plaintiffs assert that, under CEO Jensen Huang, Nvidia concealed the significant role of crypto mining sales in its top-tier GeForce GPUs, suggesting instead that its robust revenue was mainly due to gaming demand growth.

The lawsuit claims that when the cryptocurrency market plummeted towards the end of 2018, Nvidia’s earnings suffered, falling short of revenue expectations and causing its stock value to decrease by more than 28% within just two days. Shareholders believe that the company failed to inform them about the potential risks associated with the unpredictable nature of the crypto market, leaving them exposed to substantial financial losses.

Today, the Supreme Court declined to review Nvidia’s appeal concerning a previous decision made by the Ninth Circuit, meaning the original ruling stands. Nvidia had contended that their lawsuit didn’t meet the stringent criteria established by the 1995 Private Securities Litigation Reform Act, a law designed to curb unnecessary securities fraud claims. The company asserted that their statements were neither untruthful nor deliberately deceptive.

Nvidia expressed their preference for the higher court’s ruling upholding the lower court’s dismissal of the case, but they are ready and equipped to carry on with their defense should the need arise.

Second Securities Case Dismissed This Quarter

During oral hearings, various judges appeared uncertain about taking action, implying that the case didn’t involve a significant legal question worthy of Supreme Court consideration, but instead was more about a factual disagreement that would be more appropriately settled in lower tribunals.

The Supreme Court’s decision is being celebrated as a win for shareholders’ rights and the responsibility of corporations towards their stakeholders.

If Nvidia had received a favorable judgment, it would have set an important legal precedent, making it simpler for businesses to quickly dismiss shareholder lawsuits and evade expensive disclosure processes. This high-profile case serves as a reminder of the intricate dilemma faced by courts in striking a balance between shielding corporations from baseless claims and upholding strong standards for financial transparency and shareholder privileges.

For this term, the Supreme Court has discarded two cases involving securities fraud – the second one being the dismissal we are discussing now. Earlier in the month, they declined an appeal lodged by Meta Platforms regarding a different lawsuit accusing them of mishandling data-related charges linked to Cambridge Analytica.

Nevertheless, for Nvidia, the risks continue to be substantial. Previously, the company had resolved similar issues with the Securities and Exchange Commission (SEC) for a sum of $5.5 million in 2020. However, the ongoing shareholder lawsuit might lead to further financial and reputational losses.

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2024-12-12 02:18