Nvidia will pay $5.5 million to resolve claims that it illegally concealed the number of GPUs supplied to crypto miners. The allegations and a settlement with the corporation were revealed Friday by the US Securities and Exchange Commission. Its decision alleges that Nvidia deceived investors by declaring a substantial increase in revenue tied to “gaming,” while concealing how much of its success was dependent on the considerably more unpredictable crypto industry. As part of the settlement, Nvidia does not acknowledge wrongdoing, but it promises to cease any illegal omissions to disclose information.
The charges are based on Nvidia’s financial disclosures for the fiscal year 2018. According to the SEC, Nvidia noticed an increase in crypto mining-related sales in 2017, when the incentives for mining Ethereum increased considerably. Crypto mining was widely publicised as a cause of GPU scarcity, and Nvidia developed a second CMP line particularly for mining to avoid shortages for gamers. Employees, however, admitted that many gaming GPUs were still being sold to miners. “The company’s sales people, particularly in China, indicated what they thought to be large increases in demand for Gaming GPUs as a result of crypto mining,” the order states.
Given the volatile nature of cryptocurrencies, Nvidia’s sales figures did not necessarily suggest consistent future growth, making investments in it riskier. The SEC alleges that “NVIDIA’s analysts and investors were interested in knowing the extent to which the company’s Gaming income was influenced by crypto mining and consistently probed senior management about the extent to which gains in gaming revenue during this time frame were driven by crypto mining.”
Despite this, Nvidia did not identify mining-related sales as a factor in the performance of its gaming segment. Meanwhile, it highlighted cryptocurrency as a key element in other markets, which led the SEC to believe that it was being intentionally deceptive. And the investors’ concerns turned out to be justified. A cryptocurrency meltdown in late 2018 (combined with a weaker Chinese market) caused it to lower its quarterly earnings predictions by $500 million, prompting a shareholder lawsuit.
“NVIDIA’s omissions to disclose crucial information deprived investors of critical information needed to evaluate the company’s operations in a major market,” said Kristina Littman, head of the SEC’s Crypto Assets and Cyber Unit. “All issuers, including those who pursue emerging technology prospects, must ensure that their disclosures are timely, comprehensive, and accurate,” she added.