GPUs and Cryptocurrency

Cryptocurrency’s remarkably interesting market dynamics over the past decade has led to litigation. Given the interest in mining the cryptocurrency, lawsuits have ensued regarding the graphics processing units (“GPUs”) used to mine the cryptocurrency. One such litigation was a securities class action. Relevant details regarding the GPUs is reproduced below with internal citations and quotations omitted.  

In 2013, Advanced Micro Devices, Inc. (“AMD”), NVIDIA’s primary GPU competitor, experienced this volatility when prices for Bitcoin, used on the most popular cryptocurrency network, skyrocketed. AMD’s GPUs were in heavy demand during this time, with processors that usually sold for $200-300 per unit selling for $600-800 at the height of the bubble.” However, when prices for Bitcoin later dropped more than 70%, so too did demand for AMD GPUs—a problem compounded by miners dumping their AMD GPUs on the secondary market at steep discounts. AMD revenues suffered as its crypto-related sales evaporated.

In 2016, the price of Bitcoin again rallied, and many new currencies entered the market. Although Bitcoin miners moved away from GPUs to application specific integrated circuits (“ASICs”), miners for these new currencies still relied on GPUs. The Ethereum network, the most significant of the new cryptocurrency networks, also saw its cryptocurrency, Ether, rise in price: it temporarily peaked at over $400 per token in June 2017 and several months later, in January 2018, Ether topped $1,400 per token, an increase of more than 13,000% in a single year. During this run up in GPU-mined cryptocurrency prices, miners turned to NVIDIA— specifically, its enormously popular line of GeForce Gaming GPUs—and began to purchase GeForce GPUs in droves. In May 2017, NVIDIA launched a special GPU designed specifically for cryptocurrency mining.

The Northern District of California dismissed this suit because plaintiffs failed to adequately plead scienter.

IRON WORKERS LOCAL 580 JOINT FUNDS, et al., Plaintiffs, v. NVIDIA CORPORATION, et al., Defendants. Additional Party Names: Colette Kress, E. Ohman J:or Fonder, Jeff Fisher, Jensen Huang, Stichting Pensionenonds PGB, No. 18-CV-07669-HSG, 2021 WL 796336, at *1 (N.D. Cal. Mar. 2, 2021).

Posted March 7, 2021.

First Decision With “Crypto”

The first court decision with “crypto” was March 4, 1941 in the Third Division of the United States Customs Court. The questions before the court involved the commercial designation of the statutory term “amorphous graphite” and particular descriptions that manufacturers used to buy and sell products having certain attributes.

The government called several witnesses, including Doctor Kerr, an Associate Professor of Mineralogy at Columbia University. Doctor Kerr used the term “crypto crystals” to define certain characteristics of graphite.

Ultimately, the court established that “amorphous graphite” includes graphite with a crystalline structure and the imported material at issue was included within the tariff designation of “amorphous graphite”. Doctor Kerr’s use of “crypto” is different than the “crypto” as it relates to electronic monetary systems.

As the twenty-first century continues, the decisions and judgments regarding “crypto currency”, “crypto-currencies”, and the like, will dramatically increase to provide guidance on decentralized finance as it interfaces with society and everyday life. 

J.F. Starkey & Co. v. United States, 6 Cust. Ct. 118 (Cust. Ct. 1941).

Posted March 5, 2021