A class action lawsuit has been filed against tech giant Nvidia, with the plaintiffs accusing the company of making misleading statements about how it can help mitigate the effects of the reduced demand from the cryptocurrency market.
The suit was filed by the Schall Law Firm, who specializes in shareholder rights litigation and securities-related class action lawsuits. Last year, the cryptocurrency market was in a prolonged, with the prices of mining rigs and PC Graphics Processing Units (GPUs) reaching astronomical levels.
Mining rigs were in high demand and were sold at high prices, with everyone, from random purchasers of rigs to large companies snapping them up. This led to shortages of rigs, leaving manufacturers like AMD and Nvidia with no option but to increase their production to help meet up with the increased demand.
However, when the crypto market came crashing down, demand for mining rigs plummeted and prices for the hardware sank. The reduction in demand left manufacturers like Nvidia with large inventories collecting dust. To unload the rigs manufacturers began to flood the market dropping prices even lower in a bid to recoup their investment.
With its oversupply, Nvidia saw rounds of losses in the stock market, and by December 21, the company was the worst performer on the S&P 500, after it experienced a massive sell-off of its shares that dropped its stock price by 54 percent. According to the lawsuit, which was filed on December 24, Nvidia claimed to be “masters at managing their production channel,” while also stating that they will be able to ensure proper monitoring of activities in the crypto market.
Nvidia was also accused of assuring investors that they will absorb the effects of a reduced demand for mining rigs by crypto miners with the strong demand in the game industry.
The claim further reads:
“Based on these facts, the Company’s public statements were false and materially misleading throughout the class period. When the market learned the truth about NVIDIA, investors suffered damages.”
According to the release, the case has not yet been certified, and potential plaintiffs won’t be given any representation until this certification is secured. For now, the Schall Law Firm is encouraging investors who bought shares from Nvidia between August 10, 2017, and November 15, 2018, to get in touch with them before January 19, 2019.
Images from Shutterstock.