SEC Slaps NVIDIA With A $5.5M Fine For Not Adequately Disclosing Crypto GPU Sales Impact
The United States Securities and Exchange Commission (SEC) has accepted a $5.5 million settlement offer from NVIDIA over findings that it "failed to disclose" in its filings that "cryptomining was a significant factor in year-over-year growth" from its GPU sales. Though NVIDIA submitted the offer, which the SEC accepted, it comes without admitting or denying the agency's findings.
According to the SEC, the inadequate reporting occurred in two consecutive quarters during NVIDIA's 2018 fiscal year (ending January 28, 2018). It was at the beginning of NVIDIA's 2018 fiscal year that the SEC says GPUs became popular for mining cryptocurrency, and prior to that cryptomining didn't meaningful demand for NVIDIA's graphics cards.
"The rise in demand for GPUs for performing cryptomining corresponded with the rise in certain crypto asset prices. ETH prices rose from under $10 on January 1, 2017, to nearly $800 on January 1, 2018. During the relevant period, some of NVIDIA’s sales personnel expressed their belief that much of the increased demand for the company’s Gaming products, primarily in China, was being driven by cryptomining," the SEC states.
By that time Bitcoin miners had already largely shifted to dedicated ASIC hardware. That was not and is not the case with Ethereum and some other forms of crypto, which can effectively be mined on GPU hardware. Partially as a result, NVIDIA saw its its gaming business grow 52 percent year-over-year in the second quarter of its 2018 fiscal year, and 25 percent the next quarter.
The problem, according to the SEC, is that NVIDIA had information to indicate that cryptocurrency played a big role in its gaming division's revenue growth, and that it's filings were "misleading" to investors since that info was not properly conveyed.
"NVIDIA’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market," said Kristina Littman, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit. "All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate."
The $5.5 million settlement is a drop in the bucket for NVIDIA, which is coming off a record $7.64 billion in revenue during its most recent quarterly earnings, a year-over-year gain of 53 percent. For its 2018 fiscal year, NVIDIA generated $9.71 billion for the full year, for a profit exceeding $3 billion.