DOJ, SEC show ‘strong interest’ in reviving Nvidia’s crypto-related fraud case

The United States Department of Justice and the Securities and Exchange Commission have urged the Supreme Court to proceed with the Nvidia securities fraud case.

The U.S. Attorney General Elizabeth Prelogar and SEC senior attorney Theodore Weiman said in a joint brief dated Oct. 2 that the U.S. is interested in the Nvidia case because it relates to requirements to “defend fraud and be a scholar in private securities fraud class actions.” Private Securities Litigation Reform Act of 1995.”

Both organizations argued that the class-action lawsuit had “sufficient details” to warrant reopening the case even though it was dismissed by the court in 2021, adding that the Supreme Court should green light the case to be revived by an appeals court.

“Therefore, the United States has a strong interest in the proper construction of the PSLRA and has previously participated as amicus curiae in cases regarding the interpretation and application of the PSLRA.”

US Department of Justice

Meanwhile, 12 former SEC officials filed a separate amicus brief supporting the class action the same day. The summary emphasized the importance of specific enforcement of federal security laws to the integrity of the US capital markets.

Moreover, they argued that Nvidia’s arguments against the lawsuit required the class group to “have access to internal documents and databases prior to discovery and preclude the use of experts during the defense phase.” Former officials also stated in the briefing that “none of it is supported by law or good policy.”

Nvidia faces allegations of crypto misrepresentation

In addition, six additional amicus briefs supporting the class group were filed Oct. 2 by quantitative experts, law professors, institutional investors, the American Association for Justice, and the Anti-Fraud Coalition.

The class-action lawsuit against Nvidia and its CEO Jensen Huang was first filed in 2018. The plaintiffs accused Nvidia of misleading investors by misrepresenting the portion of its sales devoted to crypto-related activities.

The plaintiff group alleged that the company violated the U.S. Securities Exchange Act of 1934 by making materially false or misleading public statements about the extent to which Nvidia’s sales revenues were tied to crypto mining.

The case was dismissed in 2021, but the San Francisco-based Ninth U.S. Circuit Court of Appeals revived the case in a 2-1 decision. Nvidia agreed to settle the charges with US authorities in 2022 by paying $5.5 million. The accusations alleged that the company did not adequately disclose the effects of crypto mining on its gaming business.

Then, in its second-quarter 2022 earnings call, Nvidia vice president Colette Kress announced that the company plans to exit the crypto space entirely due to a sharp decline in revenue from its crypto-related activities.

Nvidia projected to generate over $400 million in revenue from manufacturing crypto mining equipment throughout 2018, but only managed to generate 18% of the projected revenue.