The US Supreme Court dismissed an appeal by Nvidia Corp., leaving it to face a lawsuit that accuses the company of misleading shareholders about its reliance on crypto-mining revenue in the run-up to a market crash.
The dismissal came four weeks after several justices questioned whether the case presented the type of broad legal issue that would warrant a Supreme Court ruling. Nvidia, the world’s most valuable company, contended the shareholders’ lawsuit lacked enough specificity to go forward to the evidence-gathering stage of litigation.
“I’m not actually sure what rule we could articulate that would be clearer than our cases already say,” Justice Sonia Sotomayor said during the Nov. 13 argument.
As is its usual practice, the court didn’t provide any explanation for dropping the case, saying only that it was being “dismissed as improvidently granted.”
It’s the second securities-fraud case the justices have scrapped in a term that is only two months old. The court last month dismissed an appeal by Meta Platforms Inc., leaving it to face accusations of misleading shareholders about the data-harvesting scandal involving political consulting firm Cambridge Analytica.
A ruling favoring Nvidia might have helped other companies win early dismissal of shareholder suits and avoid the expense of mounting a full-scale defense. The case centered on the protections Congress gave companies in the 1995 Private Securities Litigation Reform Act, which requires lawsuits to make key allegations “with particularity.”
The Nvidia shareholders say that in 2017 and 2018 Chief Executive Jensen Huang hid the fact that record revenue growth was being driven by mining-related sales of the company’s flagship GeForce GPU product, rather than by sales for gaming. The chipmaker’s products have become key computer components used to complete the complex calculations to extract cryptocurrencies.
The investors say crypto market volatility put the company in a precarious spot when the market crashed in 2018. The company said in November 2018 that it had missed its revenue projections, sending shares tumbling more than 28% over two days. Huang at the time said a “crypto hangover” was to blame.
The San Francisco-based 9th US Circuit Court of Appeals said the lawsuit could go forward in a federal district court in Oakland, California.
The investors are led by a unit of Swedish institutional investor E. Ohman J:or AB.
Nvidia in 2020 agreed to pay $5.5 million to settle related allegations by the Securities and Exchange Commission.
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