The U.S. Supreme Court decided to toss out the appeal of Nvidia that sought to avoid a shareholder lawsuit, accusing the company of not being transparent to its investors over how much of its total sales was anchored on cryptocurrency.
Arguments were heard by the justices of the high court on Nov. 13 and they decided to dismiss the appeal of the AI chipmaker to overturn a lower court's ruling allowing a class action suit against the tech giant to move to the next phase of the case.
The class action suit was filed by the Stockholm, Sweden-based investment management firm E. Ohman J:or Fonder AB in 2018. The dismissal was without an explanation, which according to Reuters was a one-line order.
Since the Supreme Court did not resolve the issues propounded by both parties, the decision of the lower court to let the case move forward still stands.
One of the main issues that was put forward by the Big Tech was whether the plaintiffs were able to meet the requirements set by law in bringing private securities fraud suits as defined in the Private Securities Litigation Reform Act of 1995. The law was established in order to prevent frivolous suits against corporations.
Plaintiffs accused the company and CEO Jensen Huang of violating the Securities Exchange Act. The grounds that the plaintiffs used was the pronouncement of Nvidia in 2017 and 2018 where the company allegedly downplayed the figure pertaining to the growth of the company derived from crypto-related purchases, NY Post reported.
It can be recalled that at the start of 2017, when the prices of a number of cryptocurrencies rose, the chips of the company also rose for cryptomining, a process of complex mathematical computations to secure cryptocurrencies.
However, in 2018, Nvidia's revenue projections were hit along with a drop in crypto profitability, eventually resulting in the fall in share prices.
Subsequent to a decline in the price of Nvidia shares, shareholders questioned the company, accusing it of withholding the impact of cryptomining on the business. The suit was brought forward for the recovery of any lost revenue.
In 2022, Nvidia agreed to pay $5.5 million to authorities to settle the charges relative to the alleged impact of cryptomining on its business. Thereafter, a federal judge dismissed the lawsuit but the 9th U.S. Circuit Court of Appeals based in San Francisco revived it, siding with the plaintiffs and having found adequacy in their claims that CEO Huang had made "false or misleading statements and did so knowingly or recklessly."
Deepak Gupta, who represented the shareholders before the Supreme Court, called the dismissal "a win for corporate accountability."
An Nvidia spokesperson said the company is "fully prepared to continue our defense."
