A U.S. federal judge has approved a class-action lawsuit against NVIDIA and its CEO Jensen Huang, alleging they deliberately concealed the impact of cryptocurrency mining on gaming GPU revenues during 2017 and 2018. The lawsuit claims NVIDIA misclassified over $1 billion in mining-related GPU sales under its gaming segment, misleading investors about the company's exposure to crypto market volatility.
Core Allegations: Misleading Revenue Classification
Plaintiffs argue that during the 2017-2018 crypto boom, a massive portion of NVIDIA's high-end GPUs were purchased by miners for proof-of-work mining, particularly Ethereum. Instead of reporting this as a separate “crypto mining” revenue stream, NVIDIA lumped it into the gaming division. This practice prevented investors from assessing the firm's dependence on the volatile cryptocurrency market. When crypto prices crashed in late 2018, mining demand evaporated, causing NVIDIA's gaming revenue to plummet and its stock price to drop sharply.
The lead attorney for the plaintiffs stated that internal evidence suggests NVIDIA executives were well aware of the GPUs' mining usage but chose not to disclose it transparently. The judge ruled that the allegations of securities fraud and false statements have sufficient merit to proceed to trial.
Not the First Penalty: SEC Previously Fined $5.5M
This is not NVIDIA's first legal trouble over the same issue. In 2022, the U.S. Securities and Exchange Commission (SEC) fined NVIDIA $5.5 million for failing to disclose mining-related sales in multiple quarterly reports during 2017 and 2018, violating disclosure rules under the Securities Act.
However, plaintiffs in the class action argue that a $5.5 million fine is insignificant compared to investor losses. They are seeking compensatory damages for the stock price decline caused by the alleged misrepresentations, potentially running into hundreds of millions of dollars. Legal analysts believe that if the jury finds NVIDIA acted with intent to defraud, the payout could be substantially larger.
Industry Context: Blurred Lines Between Gaming and Mining
GPUs were originally designed for 3D rendering and gaming, but their parallel processing power made them ideal for cryptocurrency mining, especially under proof-of-work algorithms like Ethash. During the crypto frenzy of 2017-2018, miners hoarded high-end graphics cards, leading to a severe shortage and inflated prices for gamers. Despite NVIDIA's later introduction of 'LHR' (Lite Hash Rate) chips, many unrestricted GPUs had already found their way onto mining rigs.
Critics have long accused NVIDIA of deliberately obscuring mining-related revenue in its financial reports—both to avoid alarming investors about reliance on a volatile market and to maintain goodwill with the core gaming community. The approval of this class action could force other tech companies to reassess their own revenue classification and disclosure practices.
Outlook and Market Impact
The case now enters the discovery phase, where NVIDIA must produce internal emails, financial drafts, and other key documents. A loss would not only mean significant financial damages but could also compel the company to restate past earnings reports or adopt stricter disclosure standards. NVIDIA shares edged lower in after-hours trading following the news.
For the crypto industry, this lawsuit underscores the deep entanglement between traditional tech giants and cryptocurrency markets. As legal accountability tightens, publicly-traded companies will face increasing scrutiny on how they classify revenue derived from digital asset-related activities. Investors should remain vigilant against similar financial reporting pitfalls and closely examine the underlying sources of reported revenue.