Saturday, July 2, 2022

Nvidia Fines $5.5M for Disclosures About Cryptomining GPUs

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Nvidia will pay $5.5 million to settle the lawsuit that illegally covered up how many of its graphics cards were sold to cryptocurrency miners. The US Securities and Exchange Commission announced the charges and a settlement today with the company. His order claims Nvidia misled investors by reporting a huge surge in “gaming” revenue, hiding how much its success depended on the much more volatile crypto market. Nvidia admits no errors as part of the settlement, but agrees to stop unlawful failure to disclose information.

The charges stem from Nvidia’s financial reports for fiscal 2018. The SEC notes that Nvidia saw an explosion in crypto mining-related sales in 2017, as rewards from mining Ethereum grew dramatically. Crypto mining was widely reported as a cause of GPU scarcity, and Nvidia launched a separate CMP line specifically for mining, in an effort to avoid shortages for gamers. But employees apparently acknowledged that many gaming GPUs still went to miners. “The company’s sales force, particularly in China, reported what they believed to be a significant increase in demand for gaming GPUs due to crypto mining,” the order said.

Given the boom-and-bust nature of cryptocurrency, this meant that Nvidia’s sales numbers didn’t necessarily indicate reliable future growth, making investing in it more risky. NVIDIA’s analysts and investors were interested in the extent to which the company’s gaming revenues were impacted by crypto mining and routinely asked senior management about the extent to which the increase in gaming revenues over this period was driven by crypto mining. SEC. †

Despite this, Nvidia did not mention mining-related sales as a factor in the success of its gaming division. Meanwhile, it cited crypto as a major factor in other markets, suggesting the SEC was deliberately deceptive. And investor concerns turned out to be well founded. A crypto crash in late 2018 (along with a weakening Chinese market) led it to cut its quarterly earnings forecasts by $500 million and led to a shareholders lawsuit

“NVIDIA’s disclosure flaws robbed investors of critical information to evaluate the company’s operations in an important market,” said Kristina Littman, SEC’s chief of crypto assets and cyber unit. “All issuers, including those pursuing opportunities related to emerging technology, must ensure that their disclosures are timely, complete and accurate.”

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