A U.S. federal court has upheld the lawsuit filed by plaintiffs alleging Nvidia concealed over $1 billion in GPU revenue for cryptocurrency assets, following a $5.5 million fine imposed on the company by the SEC in 2022.
Federal Judge Haywood S. Gilliam Jr. in California has acquitted the plaintiffs in a class-action lawsuit alleging that Nvidia and CEO Jensen Huang concealed the extent to which its GPU revenue for gaming depended on demand for cryptocurrency mining between 2017 and 2018.
The decision, filed on Wednesday, determined that Nvidia could not demonstrate that its claims about revenue related to cryptocurrency mining did not impact its stock price, a key legal threshold for the lawsuit to proceed as a class-action rather than individual claims.
The lawsuit stems from 2018, when investors alleged that Nvidia had attributed a significant portion of its cryptocurrency-related revenue to the gaming GPU segment, obscuring the true risks the company faced from the volatile cryptocurrency market cycle.
In 2022, the SEC fined Nvidia $5.5 million for failing to fully disclose the impact of its cryptocurrency mining operations on its business, a precedent the plaintiffs used as a key point of reference in their argument.
Internal emails became crucial evidence, causing the stock to plummet 28.5%.
The most surprising element in the court's decision was the citation of an internal email from an Nvidia vice president, in which the executive expressed the view that the company's stock price "remains high" thanks to previous statements.
Judge Gilliam Jr. concluded that the impact on price could not be ruled out given the existence of such evidence. Market data reinforced this argument: after CFO Colette Kress revealed in November 2018 that the gaming segment “failed to meet expectations due to inventory levels following the crypto boom taking longer than anticipated to be consumed,” Nvidia's stock fell by approximately 28.5% in just the next two trading sessions.
Nvidia continues to deny the allegations, arguing that cryptocurrency mining represents only a small portion of its business and that related revenue is tracked separately. However, the certification of the group, while not establishing legal liability, brings the case closer to the trial stage.
The plaintiffs include investors who purchased Nvidia stock between August 10, 2017, and November 15, 2018. The next hearing is scheduled for April 21, when the judge will determine the next steps.
According to Renz Chong, CEO of the Sovrun platform, this ruling sends a clear message to all businesses operating at the intersection of crypto assets and AI: “When the market corrects, the first thing investors and regulators will XEM at is what the management knew, when they knew it, and what they disclosed to the public.”
