The Securities and Exchange Commission today announced a settlement against technology firm NVIDIA Corporation over inadequate disclosures about the impact of crypto mining on the company’s gambling operations. The SEC’s order reveals that during consecutive quarters in NVIDIA’s fiscal year 2018, the company did not disclose that crypto mining was a key component of material revenue growth from the sale of its graphics processing units (GPUs) designed and marketed. be brought for gaming. Crypto mining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers. As demand and interest in crypto increased in 2017, NVIDIA customers increasingly used their gaming GPUs for crypto mining.
In two of its Forms 10-Q for fiscal 2018, NVIDIA reported significant revenue growth across its gaming business. However, NVIDIA had information that this increase in game sales was largely due to crypto mining. Despite this, NVIDIA, in its Forms 10-Q, has, as required, not disclosed these significant earnings and cash flow fluctuations associated with a volatile business for investors to determine the likelihood that past performance was indicative of future performance. The SEC’s order also finds that NVIDIA’s omissions of material information about the growth of its gaming business were misleading, as NVIDIA made statements about how other parts of the company’s business were driven by demand for crypto, giving the impression it was awakened that the company’s gaming activities were not significantly affected by crypto mining.
“NVIDIA’s disclosure errors robbed investors of critical information to evaluate the company’s operations in an important market,” said Kristina Littman, head of the SEC Enforcement Division’s Crypto Assets and Cyber Unit. “All issuers, including those pursuing opportunities related to emerging technology, must ensure that their disclosures are timely, complete and accurate.”
The SEC’s order finds that NVIDIA has violated Section 17(a)(2) and (3) of the Securities Act of 1933 and the disclosure provisions of the Securities Exchange Act of 1934. procedures. Without admitting or denying the SEC’s findings, NVIDIA agreed to a cease and desist order and pay a $5.5 million fine.
The SEC’s investigation was conducted by Brent Wilner of the Crypto Assets and Cyber Unit and overseen by Diana Tani and Ms. Littman of the Crypto Assets and Cyber Unit.