SEC fines Nvidia $5.5M for failing to declare cryptocurrency sales

Jeff Fisher, Senior Vice President of Gaming at Nvidia, holds an RTX 3090 Ti.

A photo: Nvidia

Nvidia, a graphics card maker since prehistoric times, has just been fined $5.5 million by the U.S. Securities and Exchange Commission for failing to tell investors how much of its 2017-2018 revenue came from crypto miners.

This $5.5 million is a settlement with the SEC regarding “Inadequate disclosure of the impact of cryptomining.” This particular case dates back to 2017, when the antics of crypto diggers made it very difficult for everyone else to buy a new graphics card, before those same people and the global chip shortage made matters worse.

In 2018 reports, Nvidia reported $9.714 billion in revenue, half of which came from “games,” but without properly specifying the role of cryptography in these numbers. These figures have risen fiscal year 2017, up as much as 52% in one quarter.

The SEC report states: “For consecutive quarters in Nvidia’s fiscal year 2018, the company did not disclose that crypto mining was an important element in its tangible revenue growth from the sale of its graphics processing units (GPUs) designed and sold for gaming. ”

That is, when its profits began to rise that year, Nvidia did not explain to investors why. When Nvidia recognized the huge mining market, it released its “Cryptocurrency Mining Processor” (CMP) line of GPUs specifically for crypto bros, but according to the SEC, their own workers knew that the rise in gaming GPU sales is also related to cryptocurrencies. . The report says,

Some employees of the company’s sales department, in particular in China, reported a significant increase in demand for gaming GPUs as a result of cryptocurrency mining. Additionally, while the company was unable to track when and which gaming GPUs were purchased for crypto mining purposes, company staff estimated, using various assumptions, that the impact of crypto mining was at levels indicating that crypto mining was significant. factor in the annual growth in gaming revenue during the relevant period.

Nvidia was required to disclose this distinction at the outset. Brazil– sounds like Form 10-Q, but, according to the Securities and Exchange Commission, did not do this, despite having the information on hand. The reason this is important to the SEC is because of the volatility associated with cryptocurrencies, which means that Nvidia has not given investors the full picture of why the numbers are rising. This meant there was less opportunity for investors to “make sure past results were indicative of future results.”

The accompanying SEC press release adds:

The SEC order also finds that Nvidia’s omission of material information about the growth of its gaming business is misleading, given that Nvidia did make statements about how other parts of the company’s business were driven by demand for cryptocurrencies, giving the impression that the company’s gaming business was not having an impact. significant impact on crypto-mining.

This apparently meant that investors were “deprived” of “critical information for evaluating a company’s business in a key market,” according to Christina Littman, head of SEC enforcement.

(For those who play drinking at home, it was section 17(a)(2) and (3) of the Securities Act of 1933 that was violated, along with the “disclosure provisions of the Securities and Exchange Act of 1934 “Drink!”)

This is despite the fact that investors “regularly” asked Nvidia’s senior management about “to what extent the growth in gaming revenue during this period was driven by crypto mining.” It appears that towards the end of fiscal year 2018, Nvidia began to acknowledge both the role of cryptocurrencies and its volatility, but in the meantime “offered and sold securities, including the issuance of shares as compensation to certain employees as part of the company’s employee incentives.” plans and sale of shares in accordance with the plan for the purchase of shares for employees.

Nvidia refused to acknowledge or deny these findings, but instead agreed to a cease and desist and a $5.5 million fine. You know what you do when you definitely don’t admit you did something wrong. ($5.5 million is 0.05% of the company’s reported revenue for 2018. That figure doesn’t make sense to her.)

Kotaku contacted to ask if Nvidia wanted to offer their side of the story, but the rep said, “We decline to comment.”

As edge notesthis volatility of cryptocurrencies proved to be a real problem in late 2018 when the entire Ponzi scheme market collapsed and Nvidia had to cut its projected profits by half a billion dollars.

Cryptocurrency: no one gives a shit since 2009.

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