Thursday September 29, 2022

Nvidia was fined $5.5 Million for concealing how many gaming GPUs were purchased to crypto miners

Nvidia will pay $5.5 Million to settle charges that it illegally concealed how many of its graphics card were sold to cryptocurrency miners. The US Securities and Exchange Commission announced today the charges and the settlement with Nvidia. The order states that Nvidia misled investors by reporting a huge increase in revenue from “gaming” while ignoring the fact that its success was dependent on the volatile crypto market. Nvidia won’t admit to wrongdoing, but it will stop any unlawful failures of information disclosure. The charges stem from Nvidia’s fiscal year 2018. According to the SEC, Nvidia witnessed a huge increase in crypto mining-related sales in 2017. This was when the rewards for mining Ethereum increased dramatically. Nvidia created a separate CMP line for mining to combat GPU shortages. However, employees seemed to acknowledge that many gaming GPUs were still being used by miners. According to the order, “The company’s sales representatives, particularly in China, reported significant increases in demand Gaming GPUs due to crypto mining.”
Nvidia’s sales numbers were not indicative of reliable future growth due to the volatility of cryptocurrency. This made it more risky to invest in it. According to the SEC, NVIDIA’s analysts as well as investors were interested to understand how crypto mining affected gaming revenue. They routinely asked senior management to explain how crypto mining impacted gaming revenue.
Nvidia did not mention mining-related sales in its success of its gaming division, despite this. The SEC was suspicious when Nvidia mentioned crypto as a key factor in other markets. This suggested that it was deliberately misleading. Investors’ fears were well-founded. Due to a crypto crash in late 2018, and a weakening Chinese stock market, it had to reduce its quarterly earnings projections by $500M. This prompted a shareholder lawsuit.
Kristina Littman, head of the SEC Crypto Assets and Cyber Unit, said that NVIDIA’s disclosure problems had deprived investors of crucial information necessary to evaluate the company in a key market. “All issuers, even those who pursue opportunities involving emerging technologies, must ensure that their disclosures have been timely, complete, accurate, and current.”

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