Nvidia suffers blow as US Supreme Court throws out shareholder lawsuit

The U.S. Supreme Court rejected Nvidia Corp.’s appeal, leaving the company to face a lawsuit accusing it of misleading shareholders about relying on crypto mining revenue ahead of the market crash.

The dismissal came four weeks after several justices questioned whether the case posed the kind of broad legal issue that would warrant a Supreme Court ruling. Nvidia, the world’s most valuable company, has argued that the shareholders’ lawsuit lacks sufficient specificity to move into the evidence-gathering phase of the case.

“I’m not sure what rule we can state that will be clearer than what our cases already say,” Justice Sonia Sotomayor said during debate on Nov. 13.

The court, as usual, offered no explanation for dismissing the case, saying only that it was “admittedly dismissed with prejudice.”

This is the second securities fraud case that judges have tossed out in just two months. The court last month rejected Meta Platforms Inc.’s appeal, leaving the company facing charges of misleading shareholders over a data-harvesting scandal involving political consulting firm Cambridge Analytica.

A ruling in Nvidia’s favor could have helped other companies get shareholder lawsuits dismissed early and avoid the expense of mounting a full defense. The case focused on protections Congress gave companies in the Private Securities Litigation Reform Act of 1995, which required lawsuits to make “particularly” significant allegations.

Nvidia shareholders say 2017 and 2018 Chief Executive Officer Jensen Huang concealed the fact that record revenue growth was driven by mining-related sales of the company’s flagship GeForce GPU product rather than gaming sales. The chipmaker’s products have become essential computer components used to complete complex calculations to mine cryptocurrencies.

Investors say volatility in the crypto market put the company in a risky situation when the market crashed in 2018. The company announced in November 2018 that it missed revenue forecasts and its shares lost more than 28% of their value in two days. Huang said at the time that a “crypto hangover” was to blame.

The San Francisco-based 9th U.S. Circuit Court of Appeals said the case could be heard in a federal district court in Oakland, California.

The investors are led by a unit consisting of Swedish institutional investor E. Ohman J:or AB.

Nvidia agreed to pay $5.5 million to resolve related Securities and Exchange Commission allegations in 2020.