Court Approves Nvidia Class Action Over Cryptocurrency

The SEC fined Nvidia $5.5M for not disclosing how crypto mining affected its revenue, forming the back part of the class action.

A US district court has allowed a class-action lawsuit against Nvidia and CEO Jensen Huang to proceed following investor claims that more than $1 billion in crypto revenue was actually hidden in its gaming offerings.

The tech giant also failed to prove that its crypto mining revenue statements did not affect the company’s stock price.

False statements

Wednesday’s filing suggests that during the crypto boom of 2017-2018, Nvidia misled investors into believing they were buying gaming GPUs. However, the sale was actually tied to the crypto market, and when prices started to fall, the company was left with a lot of unsold inventory which caused its stock price to drop.

Plaintiffs first sued the company in 2018, saying it failed to disclose nearly $1.3 billion in revenue from the sale and that Huang understated real demand. At the time, the CEO appeared in multiple interviews saying that the firm’s crypto-related demand was “small.” He also emphasized that the gaming division is its core business and that crypto simply provides “more juice.”

Additionally, the company launched a special crypto chip SKU whose sales were reported to be less than half of mining revenue. The plaintiffs argued that this was done to reassure investors that Nvidia’s gaming business was separate from its mining operations.

According to the documents, the company’s defense was based on the argument that these statements were not made with the intention of influencing investors and, therefore, had no price impact. However, Judge Gilliam Jr. concluded that Nvidia failed to prove this, pointing to an internal email from one of the firm’s executives as evidence.

“They expressed the view that the stock price remained high because of those prior statements, and the court cannot conclude that there was no price effect given that evidence.”

As a result, the court ruled that the class action was allowed to proceed and scheduled a trial for April 21.

You may also like:

NVIDIA’s Stock Price Plummet

Things changed in 2018 when the crypto market started to weaken. In August, Nvidia announced that it had reduced revenue and agreed to miners who buy its gaming GPUs. The company also shared that its inventory grew by 36%.

Reacting to the news, Nvidia’s stock price fell 4.9%. The tech giant later issued another announcement to reduce revenue, citing a drop in demand for crypto.

At the time, Colette Kress, the firm’s CFO, admitted that gaming revenue had missed expectations due to poor sales. This led to the company’s stock price falling by 28.5% in the next two trading sessions.

Meanwhile, the US Securities and Exchange Commission (SEC) previously fined the company $5.5 million for failing to disclose how crypto mining affected its regular currency. Regulators say they should have told investors that most GPU demand comes from miners.