Nvidia agreed to pay up $5.5 million in fines and penalties for not publicly disclosing that its GPUs were being used for cryptocurrency mining, following an SEC investigation into whether the company was acting illegally.
Nvidia has agreed to pay $5.5 million to settle a Securities and Exchange Commission probe over its disclosure of the impact on its business from cryptocurrency mining.
WASHINGTON — Nvidia Corp. NVDA -0.90% has agreed to pay $5.5 million to resolve a regulatory probe into whether it appropriately disclosed the effect of cryptomining on its sales of powerful computer gaming hardware.
Nvidia’s graphics processing units, or GPUs, were considerably increased in its 2018 fiscal year by users who purchased them to mine new cryptocurrency units, according to the Securities and Exchange Commission. The SEC stated Friday that Nvidia kept investors in the dark for two quarters, depriving them of information they needed to predict the company’s future financial performance.
Nvidia, located in Santa Clara, California, reached an agreement with the SEC without admitting or rejecting the charges. The company’s spokesperson refused to comment. Nvidia’s stock dropped roughly 2% on Friday.
People have been using Nvidia’s strong GPUs to conduct difficult mathematical operations that unlock additional units of cryptocurrency like ether. The business now makes GPUs that are particularly intended for cryptomining.
Cryptomining had no significant influence on Nvidia’s GPU sales prior to its 2018 fiscal year, according to the SEC. That changed when cryptocurrency values rose, driving up demand for Nvidia’s GPUs, notably in China.
According to the SEC, the company’s gaming revenue, which includes sales of cryptomining chips, increased 52 percent in the second quarter of its 2018 fiscal year and 25 percent in the third quarter, compared to the same time the previous year. According to the SEC’s ruling, investors and analysts who followed the firm “often queried senior management about the degree to which improvements in gaming revenue during this time period were caused by cryptomining.”
According to the SEC, Nvidia was unable to monitor which exact chips were acquired for cryptomining. However, according to the SEC, several sellers claimed large year-over-year spikes in demand owing to cryptomining.
The SEC said that Nvidia acknowledged cryptomining was a large component of one sub-segment of product sales in one securities filing, but that the reporting did not adequately address whether that trend would continue, vary, or stop in the future.
According to the SEC, public corporations are required to disclose known trends and risks that might substantially affect their financial performance, but Nvidia didn’t declare the significant effect of cryptomining on gaming sales growth until the end of its 2018 fiscal year.
“Nvidia’s omissions to disclose crucial information robbed investors of critical information needed to assess the company’s operations in a significant market,” said Kristina Littman, head of the SEC’s Crypto Assets and Cyber Unit.
Demand for select Nvidia GPUs fell in late 2018 as cryptocurrency values plummeted. Nvidia said at the time that cryptocurrency-related income will be insignificant in the future.
According to Nvidia’s most recent annual report, released in March, the firm currently finds it impossible to determine “with any acceptable degree of accuracy” the effect of cryptomining on its business due to price volatility, shifting technical standards, and government regulation.
After China tightened down on cryptocurrency last year, the United States swiftly became the global leader in bitcoin mining. Shelby Holliday of the Wall Street Journal examines the impact of the worldwide change on the bitcoin network, the energy business, and the environment. Getty Images/Mark Felix/Agence France-Presse
Dave Michaels can be reached at [email protected]
Corrections & Amplifications The SEC said Nvidia’s sales of its GPUs were materially boosted in its 2018 fiscal year by consumers who bought them to mine new units of cryptocurrencies. An earlier version of this article incorrectly said the period was calendar year 2018. (Corrected on May 6)
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‘Nvidia Settles Crypto-Disclosure Probe,’ appeared in the print version of the May 7, 2022, issue.
The “sec charges nvidia disclosures impact cryptomining” is a recent article that discusses the SEC’s decision to charge Nvidia with violating securities laws for not disclosing how its GPUs were used in cryptocurrency mining.
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