The SEC has reached a $5.5 million settlement with Nvidia for failing to disclose the impact of cryptocurrency mining on its gaming business in two quarterly filings in 2018.
"Without admitting or denying the SEC’s findings, NVIDIA agreed to a cease-and-desist order and to pay a $5.5 million penalty," reads a release from the SEC.
Nvidia started mentioning crypto mining and its impact on its original equipment manufacturer (OEM) business as early as August 2017.
“Our PC OEM revenue increased by approximately 200% due primarily to strong demand for GPU products targeted for use in cryptocurrency mining,” Nvidia wrote in its quarterly filing for the three months ending on July 30, 2017, noting that revenue for its GeForce GPU products, in particular, had increased 90% because of their popularity among crypto miners.
But the company had not mentioned that its gaming business had also benefited from popularity among crypto miners.
“Nvidia’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market,” said Kristina Littman, the SEC’s cyber unit chief. “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”
Nvidia and crypto mining
In 2018, the Nvidia GeForce GTX 580, which was marketed for gamers, had become popular among crypto miners. But the company was still dubious of crypto mining’s impact on its sales.
In November that year, after the demand for graphics cards had dropped, Nvidia CEO Jensen Huang said it was impossible to know how much of its hardware was being used by miners.
“My point is that we just don’t know — when we’re going through what we see as our own sales, and what the percentage of is in our own sales, what we don’t know is how much inventory AMD pushed into the channel,” he told VentureBeat. “There’s no way for us to calculate that.”
In a quarterly report filed on May 18, 2018, for the three months ended April 29 that year, NVIDIA credited the increase in gaming revenue to eSports.
“GPU business revenue was $2.77 billion, up 77% from a year earlier and up 12% sequentially, led by gaming and datacenter,” the company wrote in an SEC filing. “Gaming revenue was up 68% from a year ago and down 1% sequentially. Gaming GPU growth was fueled by demand from gamers playing eSports, momentum of the Battle Royale genre, and AAA cinematic games.”