SANTA CLARA, CA – MAY 21: A sign will be posted in front of Nvidia headquarters in Santa Clara, CA on May 21, 2024… (+). Chipmaker Nvidia is scheduled to announce its first quarter results on Wednesday, May 22nd. (Photo by Justin Sullivan/Getty Images)
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SEC, DOJ upholds NVIDIA crypto revenue lawsuit, digital court defends
At a pivotal time for corporate accountability in the crypto industry, a class action lawsuit accusing NVIDIA of concealing more than $1 billion in GPU sales to crypto miners has been filed by the U.S. Securities and Exchange Commission (SEC). and the Department of Justice. (Department of Justice). The lawsuit, filed by investors in 2018, alleges that Nvidia misled shareholders by attributing explosive growth to gaming demand, while downplaying the significant revenues generated from cryptocurrency mining. . The SEC and the Department of Justice recently filed amicus briefs urging the U.S. Supreme Court to allow the case to proceed, emphasizing the importance of investor protection and corporate transparency. Meanwhile, the Digital Chamber of Commerce (TDC) has intervened in NVIDIA’s defense, filing its own amicus brief seeking reversal of the previous court’s decision.
SEC and DOJ support for investor protection
The involvement of the SEC and the Department of Justice underscores the growing emphasis on corporate transparency in rapidly evolving fields such as cryptocurrencies. U.S. Attorney General Elizabeth Preloger and SEC Senior Counsel Theodore Wyman argued in court briefs that the case is sufficiently detailed to be revived and proceed to trial. According to DeCrypt, the lawsuit concerns allegations that Nvidia falsely attributed a jump in GPU sales to gaming demand, without disclosing that crypto mining was a significant contributor to the increase in sales. insisted. “This evidence, taken together, alleges that[CEO Jensen]Huang intentionally misled investors about NVIDIA’s exposure to crypto mining, meeting the ‘scientist’ standard, i.e. intent to deceive. ,” the Department of Justice and the SEC argued.
The lawsuit hinges on allegations that NVIDIA concealed the full extent of its exposure to the crypto sector by downplaying how crypto miners supported the majority of its GPU sales. DeCrypt also points out that Nvidia is suspected of maintaining a global database to track sales of GeForce GPUs to cryptocurrency miners, and that this information was revealed through first-hand testimony from former Nvidia employees. are. One insider, referred to as “FE 1,” explains how this database was used to track sales to miners, and another insider, “FE 2,” is NVIDIA’s CEO. Jensen Huang detailed how he was directly involved in a sales conference that demonstrated the impact of cryptocurrencies on society. Income was discussed. These insider accounts, combined with internal documents and the notable decline in Nvidia’s revenue after the 2018 crypto crash, form the basis of evidence supporting this claim.
The SEC previously fined NVIDIA $5.5 million in 2022 for improper disclosures related to fiscal year 2018, including how much of its revenue growth was driven by crypto mining. It is alleged that he did not accurately declare what had been brought about. The company agreed to the cease and desist order but continues to deny the allegations in an ongoing class action lawsuit.
Impact of the digital chamber
Nvidia has consistently denied these allegations, insisting that its financial disclosures accurately reflect its business operations and that it is transparent about the risks and volatility of the cryptocurrency market. Nvidia’s defense has garnered significant support from the Chamber of Digital Commerce, a leading advocate for the blockchain and crypto industry. In August 2024, the Chamber filed an amicus brief asking the Supreme Court to reverse the Ninth Circuit Court of Appeals’ decision that partially reinstated the case.
The Digital Chamber’s brief argues that the plaintiffs’ claims are speculative and do not meet the strict pleading standards of the Private Securities Litigation Reform Act of 1995 (PSLRA). The chamber of commerce said the lawsuit is based on assumptions about the cryptocurrency industry that have no basis in fact. “Plaintiffs’ lawsuit relies on ‘expert’ opinions based on unsubstantiated assumptions about the cryptocurrency industry and constructs theories divorced from the facts of NVIDIA’s business,” the brief states. listed.
Private Securities Litigation Reform Act and its Role
PSLRA was enacted to prevent frivolous litigation and plays a central role in NVIDIA’s defense. The law requires plaintiffs to present detailed and specific allegations of fraud, rather than broad speculative allegations. According to the Digital Chamber, the lawsuit against Nvidia does not meet these standards and could set a dangerous precedent if allowed to proceed.
Joshua B. Simmons, general counsel for the Digital Chamber of Commerce, emphasized that speculative litigation like this one can have a chilling effect on innovation, especially in the cryptocurrency space. “TDC’s insight into this case is shaped by our deep involvement in the crypto industry, where we recognize the potential harm that speculative litigation can have on future innovation,” Simmons said. he said.
Corporate Accountability and the Broad Impact on the Cryptocurrency Industry
Nvidia’s case highlights the tension between two competing interests: the need for transparency to protect investors and the risk of stifling innovation in emerging markets like cryptocurrencies. The SEC and the Department of Justice argue that NVIDIA’s conduct misleads investors and demands accountability, while the Digital Chamber of Commerce argues that speculative litigation is an expensive and costly move that hinders development in the high-growth technology sector. It warns that it could open the door to lawsuits.
The case could have implications for broader corporate governance practices in the tech industry, as Nvidia faces a potential legal ruling that could increase scrutiny of its crypto-related disclosures. If the Supreme Court rules against Nvidia, it could signal stricter regulatory requirements for companies involved in crypto activities. Conversely, a ruling in NVIDIA’s favor would strengthen PSLRA protections and potentially deter future speculative securities litigation.
what lies ahead
As the Supreme Court considers the fate of this case, its outcome will have far-reaching implications for both Nvidia and the crypto industry as a whole. The SEC and Department of Justice’s support for the class action lawsuit signals an increased emphasis on corporate accountability, while the Digital Chamber of Commerce’s defense of NVIDIA shows that the rapidly evolving This highlights concerns about innovation in a market that is growing rapidly. Whatever the outcome, this case marks a critical juncture in the ongoing debate about how to balance investor protection with the need for innovation in the digital economy.
