The U.S. Securities and Exchange Commission (SEC) announced it has fined Nvidia $5.5 million for inadequately disclosing the impact of cryptomining on the company’s gaming business.
According to the SEC's May 6 press release, during consecutive quarters in Nvidia's fiscal year 2018, the company unlawfully obscured to investors that its GPU sales from cryptominers was a significant driver of its revenue growth. Without admitting or denying the SEC’s findings, Nvidia agreed to a cease-and-desist order and pay the penalty.
"Nvidia’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market," SEC cyber unit chief Kristina Littman said in the press release. "All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete and accurate."
Cryptomining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers.
As demand for and interest in crypto rose in 2017, Nvidia customers increasingly used its GPUs —designed and marketed for gaming — for cryptomining.
"These significant earnings and cash flow fluctuations related to a volatile business for investors to ascertain the likelihood that past performance was indicative of future performance," the SEC press release reads. "The SEC’s order also finds that Nvidia’s omissions of material information about the growth of its gaming business were misleading given that Nvidia did make statements about how other parts of the company’s business were driven by demand for crypto, creating the impression that the company’s gaming business was not significantly affected by cryptomining."