By John Kruzel
WASHINGTON (Reuters) -The U.S. Supreme Court sidestepped on Wednesday a decision on whether to allow shareholders to proceed with a securities fraud lawsuit accusing artificial intelligence chipmaker Nvidia of misleading investors about how much of its sales depended on the volatile cryptocurrency market.
The justices, who heard arguments in the case on Nov. 13, dismissed Nvidia’s appeal of a lower court’s ruling that allowed a 2018 class action – litigation led by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB – to move forward.
The Supreme Court opted not resolve the underlying legal dispute, determining that the case should not have been granted. Its action leaves the lower court’s decision in place. The Supreme Court’s dismissal came in a one-line order that provided no explanation.
During the arguments, some of the justices expressed reservations about intervening in the case. They wondered about whether there was a clear legal issue for them to decide, as opposed to just a dispute over facts, and indicated that they were not ideally placed to resolve the case given its technical complexities.
At issue was whether the plaintiffs cleared the heightened legal bar for bringing private securities fraud suits set under a 1995 federal law called the Private Securities Litigation Reform Act that aimed to screen out frivolous litigation.
The plaintiffs accused Nvidia and its CEO Jensen Huang of violating a 1934 federal law called the Securities Exchange Act by making statements in 2017 and 2018 that falsely downplayed how much of Nvidia’s revenue growth came from crypto-related purchases.
Beginning in 2017, as the price of certain cryptocurrencies rose, Nvidia’s chips became increasingly popular for cryptomining, a process that involves performing complex math equations in order to secure cryptocurrencies such as bitcoin and ether.
By late 2018, amid a decline in crypto profitability, Nvidia’s revenue fell short of its projections, leading its stock price to fall in early November of that year.
The plaintiffs accused Nvidia and its top officials of concealing the impact of cryptomining on its business. The suit seeks unspecified monetary damages in part to recoup the lost value of the Nvidia stock held by the investors.
Nvidia in 2022 agreed to pay $5.5 million to U.S. authorities to settle charges that it did not properly disclose the impact of cryptomining on its gaming business, but without admitting or denying the findings of federal regulators.
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