SEC issues Nvidia $5.5m fine over inadequate cryptomining disclosures

Chipmaker Nvidia, without admitting or denying, has agreed to pay a $5.5 million fine issued by the US Securities and Exchange Commission (SEC) over allegations that the company did not adequately disclose to investors the true impact of cryptomining on its gaming business.

The SEC report [pdf] found that during consecutive quarters in Nvidia’s 2018 fiscal year — as crypto prices boomed and a global chip shortage took hold — the company failed to disclose that its GPUs were increasingly being used for cryptomining and that this was a significant element of its material revenue growth.

“Nvidia’s senior management internally expressed a desire to capture the cryptomining demand, and at the same time shelter its gaming business from cryptominers and protect supply of GPUs for gamers,” said the SEC report.

Nvidia, as a result, launched a series of cryptomining processors that the company then marketed to crypto bros. The report alleged, however, that Nvidia workers knew that GPU sales — primarily in China — were increasing off the back of crypto miners.

“While the company could not track when and which specific gaming GPUs were purchased for the purpose of cryptomining, company personnel estimated using various assumptions that the impact of cryptomining was at levels that would indicate cryptomining was a significant factor in the year-over-year growth in gaming revenue during the relevant period,” the SEC report said.  

The SEC report added that the chipmaker experienced total growth and an increase in its gaming revenue compared to the same period of the prior fiscal year. Nvidia’s gaming revenue increased by 52%, year-over-year for the second fiscal quarter of 2018, and by 25%, year-over-year for the third fiscal quarter of 2018.

Chief of the SEC enforcement division’s crypto assets and cyber unit Kristina Littman added in a press release that the failure to disclose critical information deprived investors of the opportunity to adequately evaluate the company’s gaming business.

“All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate,” she said.

Meanwhile, the SEC last week announced that it would bolster the size of its enforcement units that target crypto assets and cyber-related threats. The unit, formerly known as the cyber unit and named as the crypto assets and cyber unit, will gain 20 additional team members, taking the unit’s total headcount to 50.

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