Finally, Nvidia wins the lawsuit over the alleged $1 billion Crypto Mining Biz.
The investors of Nvidia were not able to convince a judge that the company had misled them.
Yesterday, Nvidia put to sleep a two-year-old lawsuit from investors, dismissing claims that the US graphics chip company hid its reliance on its burgeoning cryptocurrency mining business to the tune of over $1 billion.
The allegations “do not plausibly suggest that the defendants acted with at least deliberate or conscious recklessness,” Judge Haywood Gilliam concluded. He stated that the defendants couldn’t appeal the case.
What was it all about?
Nvidia’s graphics cards are popular with operators of cryptocurrency mining rigs. To mine, for instance, Bitcoin, a computer must race to solve complicated math puzzles. The more powerful the graphics card, the better chance a miner has at earning that Bitcoin.
To get ahead of the competition, many crypto miners buy their graphics cards from Nvidia, because the company manufactures a lot of the most powerful graphics chips in the world. Nvidia recently tried to disincentivize crypto miners from purchasing its graphics cards by launching “non-graphics” chips particularly designed for cryptocurrency mining.
This means that Nvidia’s profits are somehow tied to the fate of the volatile cryptocurrency market until they go mainstream.
A group of investors, composed mostly of pension firms and fund managers, alleged that Nvidia didn’t disclose the size of this business, which it claimed was worth over $1 billion in 2017. The investors attribute the crash of the cryptocurrency market by the end of 2017 to the decline in Nvidia’s stock price.
When the case went to court, the judge stated that there wasn’t enough evidence and stated that Nvidia’s investors might amend the case. So they did: they hired a bunch of economists from Prysm Group, who determined that Nvidia understated their GPU mining sales at around $1.126 billion.
However, Nvidia’s lawyers dismissed the report as “essentially arbitrary assumptions.” Undeterred, the investors took the case to trial, with a “confidential witness” as their canary in the coal mine. Unfortunately, the witness later stated that a number of the statements attributed to him are “untrue and inaccurate.”
The judge still permitted some of the witness statements to go on but found that they didn’t adequately show that directors knew about the crypto sales. This indicated that the investors could not prove that the directors lied about the extent of Nvidia’s crypto mining biz.
Now that the investors couldn’t get anywhere with the case, the “Court finds that leave to amend is unwarranted,” Judge Gilliam concluded.
Nvidia’s stock price had doubled since the investors filed their suit all those years ago.
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