Nvidia Faces Renewed Lawsuit Over Crypto GPU Sales

TLDR:

• Nvidia faces revived lawsuit over alleged concealment of GPU sales to crypto miners
• The Digital Chamber (TDC) warns allowing the lawsuit could lead to frivolous suits against crypto companies
• TDC claims the lawsuit relies on unsupported assumptions about the crypto industry
• Case could undermine protections set by Private Securities Litigation Reform Act (PSLRA)
• TDC argues a ruling for plaintiffs may stifle innovation in blockchain technology

The semiconductor giant Nvidia is facing a renewed legal challenge that has caught the attention of the cryptocurrency industry.

A class-action lawsuit, initially filed in 2018 and recently revived by an appellate court decision, alleges that Nvidia misled investors by downplaying over $1 billion in GPU sales to cryptocurrency miners during 2017 and 2018.

The case has prompted The Digital Chamber (TDC), formerly known as The Chamber of Digital Commerce, to file an amicus brief with the U.S. Supreme Court.

The advocacy group, which represents major players in the crypto space including Crypto.com, Ripple, and Binance, is backing Nvidia’s request for the Supreme Court to reverse the appellate court’s decision.

THE FACTS: The Private Securities Litigation Reform Act of 1995 (#PSLRA) was passed by Congress to curb the surge of frivolous lawsuits, offering protection to growing tech companies by imposing stricter requirements on private plaintiffs pursuing securities class actions.

— The Digital Chamber (@DigitalChamber) August 20, 2024

At the heart of the matter is the accusation that Nvidia and its CEO, Jensen Huang, publicly minimized the extent of GPU sales to the crypto mining sector.

The lawsuit claims that the true scale of these sales only became apparent when both the crypto market and Nvidia’s financial results experienced a simultaneous downturn.

TDC’s involvement stems from concerns that allowing this lawsuit to proceed could set a dangerous precedent for the entire cryptocurrency industry.

Perianne Boring, founder and CEO of TDC, expressed worry about the potential for an increase in what she termed “frivolous securities lawsuits” based on misconceptions about the cryptocurrency industry and its growth cycles.

The chamber’s amicus brief argues that the plaintiffs’ case relies heavily on expert opinions that make unsupported assumptions about the crypto industry and Nvidia’s sales. TDC contends that the lawsuit fails to provide specific evidence, such as documents or internal materials, to support its claims.

This approach, according to TDC, could open the floodgates for similar lawsuits against other companies, particularly those in cutting-edge sectors like cryptocurrency.

A key point of contention is whether the lawsuit meets the standards set by the Private Securities Litigation Reform Act of 1995 (PSLRA). This legislation was designed to protect emerging technologies from speculative litigation by requiring plaintiffs to clearly identify misleading statements and provide supporting facts. TDC argues that the current lawsuit falls short of these requirements.

The potential implications of this case extend beyond Nvidia. TDC warns that if the plaintiffs prevail, it could create a precedent allowing speculative claims to succeed in court.

This outcome, they argue, might lead to a surge in lawsuits against cryptocurrency companies, potentially stifling innovation by burdening firms with costly litigation and discouraging investment in the sector.

The lawsuit’s revival comes at a time when the relationship between the cryptocurrency industry and traditional tech sectors is under increased scrutiny.

GPUs, primarily designed for gaming and graphics-intensive applications, became highly sought after by crypto miners due to their efficiency in solving the complex mathematical problems required for mining certain cryptocurrencies.

Nvidia’s stock price fell nearly 30% in late 2018 when the company announced a 7% drop in expected revenues, a decline that coincided with a downturn in the crypto market. This correlation fueled suspicions about the true extent of Nvidia’s exposure to the volatile cryptocurrency sector.