SEC Fines Nvidia $5.5M for Failing to Report Crypto Sales

Jeff Fisher, SVP of Gaming at Nvidia, holds an RTX 3090 Ti.

photo: NVIDIA

Nvidia, a maker of graphics cards since prehistoric times, has just been fined $5.5 million by the Securities and Exchange Commission for failing to tell investors how much of its 2017-18 earnings came from crypto miners .

That $5.5 million is a settlement with the SEC regarding “Inadequate disclosures about the impact of cryptomining.” This particular case dates back to 2017, a time when the antics of the planet-destroying crypto-diggers made it so hard for anyone else to buy a new graphics card before the very same people and a worldwide chip shortage made it worse .

In the 2018 filings, Nvidia reported $9.714 billion in revenue, half of which was attributed to “gaming,” but without properly stating crypto’s role in those numbers. Those numbers rose dramatically in fiscal 2017, up as much as 52% in one quarter.

The SEC report states, “During consecutive quarters of Nvidia’s fiscal 2018, the company failed to disclose that crypto mining was a significant element of its substantial revenue growth from sales of its graphics processing units (GPUs) designed and marketed for games . ”

That said, when earnings started to climb this year, Nvidia didn’t properly tell its investors why. Recognizing the huge mining market, Nvidia produced its line of “Cryptocurrency Mining Processor” (CMP) GPUs specifically targeting crypto brethren, but according to the SEC, its own employees knew that soaring gaming GPU sales would do as well crypto related. The report states

Some of the company’s sales representatives, particularly in China, reported what they saw as a significant increase in demand for gaming GPUs as a result of crypto mining. Furthermore, while the company could not trace when and which specific gaming GPUs were purchased for the purpose of crypto mining, the company’s employees estimated, based on various assumptions, that the impact of crypto mining was at levels that would suggest it would that crypto mining was significant consider the annual growth in gaming revenue during the relevant period.

Nvidia had to disclose this distinction directly Brazil-sounding Forms 10-Q, but, says the SEC, didn’t do it even though the information was at hand. The reason this matters to the SEC is because of the volatility surrounding crypto bullshit, meaning Nvidia hasn’t given investors the full picture of why the numbers are rising. This meant investors were less able to “determine the likelihood that past performance was indicative of future performance.”

The accompanying press release from the SEC adds:

The SEC order also notes that Nvidia’s omissions of material information about the growth of its gaming business were misleading, as Nvidia has made statements about how other parts of the company have been fueled by demand for crypto, giving the impression that the The company’s gaming business has not been significantly impacted by crypto mining.

Apparently, that meant investors were being “withheld from critical information” to evaluate the company’s business in a key market, according to SEC Enforcement Division head Kristina Littman.

(For those playing the drinking game at home, Section 17(a)(2) and (3) of the Securities Act of 1933 has been violated, along with the “Disclosure Provisions of the Securities Exchange Act of 1934”. Drink! )

This comes despite said investors “routinely” asking Nvidia’s senior management “to what extent the increases in gaming revenue over the period have been driven by crypto mining.” It appears that at the end of fiscal 2018, Nvidia began acknowledging both crypto’s role and its volatility, but in the meantime “had offered and sold securities, including issuing shares as compensation to certain employees as part of the company’s employee incentive plan.” plans and the sale of shares as part of its employee stock purchase plan.”

Nvidia declined to admit or dispute these findings, instead agreeing to a cease and desist order and paying a $5.5 million penalty. You know how you do it when you definitely don’t admit to doing something wrong. ($5.5 million is 0.05% of the company’s 2018 reported revenue. This number is not meaningful to the company.)

kotaku asked if Nvidia wanted to offer its side of this story, but a spokesperson said, “We will decline to comment.”

When The edge Remarksthat crypto volatility was a real concern in late 2018 when the entire Ponzi scheme market collapsed and Nvidia had to cut projected earnings by half a billion dollars.

Crypto: Screwing everything up for everyone since 2009. SEC Fines Nvidia $5.5M for Failing to Report Crypto Sales

Curtis Crabtree

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