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Sweden-based investment management firm led class action

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U.S. Supreme Court heard similar Facebook case on Nov. 6

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Rulings in both cases expected by the end of June

(Adds start of arguments, comments by Justice Jackson and

Nvidia ( NVDA ) attorney)

By John Kruzel and Andrew Chung

WASHINGTON, Nov 13 (Reuters) - The U.S. Supreme Court

began hearing arguments on Wednesday in Nvidia's ( NVDA ) bid to

torpedo a securities fraud lawsuit accusing the artificial

intelligence chipmaker of misleading investors about how much of

its sales depended on the volatile cryptocurrency market.

Nvidia ( NVDA ) appealed a lower court's decision allowing a 2018

class action - litigation led by the Stockholm, Sweden-based

investment management firm E. Ohman J:or Fonder AB - to proceed.

Arguments are ongoing.

It is one of two cases to come before the Supreme Court this

month that could lead to rulings making it harder for private

litigants to hold companies to account for alleged securities

fraud. The other one, involving Meta's Facebook, was

argued on Nov. 6.

At issue in the Nvidia ( NVDA ) case is whether the plaintiffs

cleared the heightened legal bar for bringing private securities

fraud suits as set by Congress in a 1995 federal law called the

Private Securities Litigation Reform Act that aimed to screen

out frivolous lawsuits.

Liberal Justice Ketanji Brown Jackson expressed concern that

the standard Nvidia ( NVDA ) has asked the court to adopt would place too

heavy a burden on plaintiffs.

"I guess my concern is that you appear to be requiring for

plaintiffs to actually have the evidence in order to plead their

case," Jackson said, noting that critical evidence often is not

obtained by plaintiffs until a later stage of litigation.

The plaintiffs accused Nvidia ( NVDA ) 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 ( NVDA ) revenue growth came from crypto-related

purchases.

The lawsuit does not stand up to allegation-by-allegation

scrutiny, said Neal Katyal, the lawyer arguing for Nvidia ( NVDA ).

"It's certainly a long complaint. I'll spot them that. But

it's a long complaint - like cotton candy - that ... looks like

a lot of volume but dissolves," Katyal said.

Beginning in 2017, as the price of certain cryptocurrencies

rose, Nvidia's ( NVDA ) 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 ( NVDA ) revenue fell short of its projections, leading its

stock price to fall in early November of that year.

The plaintiffs accused Nvidia ( NVDA ) 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 ( NVDA ) stock held by the investors.

A federal judge dismissed the lawsuit but the San

Francisco-based 9th U.S. Circuit Court of Appeals subsequently

revived it. The 9th Circuit found that the plaintiffs had

adequately alleged that Huang made "false or misleading

statements and did so knowingly or recklessly," allowing their

case to proceed.

Nvidia ( NVDA ) argued in a filing to the Supreme Court that the

plaintiffs had failed to adequately show that the disputed

corporate statements were false, or the company had

intentionally or recklessly misled investors, as required by

law.

The plaintiffs countered that their lawsuit contained strong

enough allegations - gleaned from former employees, market

analysis and expert opinion - to survive Nvidia's ( NVDA ) request for

dismissal and should proceed.

President Joe Biden's administration supported the

shareholders in the case before the justices.

Nvidia ( NVDA ) 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.

The Facebook case argued before the justices last week

involved a federal securities fraud lawsuit brought by

shareholders, led by Amalgamated Bank ( AMAL ), who accused the

social media platform of misleading them about the misuse of its

user data.

The Supreme Court in prior rulings has limited the authority

of the Securities and Exchange Commission, the federal agency

that polices securities fraud. Its rulings in the Facebook and

Nvidia ( NVDA ) cases - expected by the end of June - now could make it

tougher for private litigants to hold companies liable for such

conduct.