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Lower court let suit led by Swedish firm proceed

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Nvidia ( NVDA ) accused of concealing the impact of cryptomining

By John Kruzel

WASHINGTON, Dec 11 (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 ( NVDA ) of misleading

investors about how much of its sales depended on the volatile

cryptocurrency market.

The justices, who heard arguments on Nov. 13 after earlier

deciding to take up the case, dismissed Nvidia's ( NVDA ) 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 court's dismissal came in a one-line order that provided

no explanation.

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 ( 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.

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.

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.

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 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 proceed to the discovery stage of litigation.

President Joe Biden's administration supported the

shareholders in the case.