NVIDIA agrees to $ 5.5 million fine for Cryto, not admitting any wrongdoing

The Securities and Exchange Commission (SEC) has fined chip developer NVIDIA Corporation for non-disclosure of cryptocurrency sales revenue in fiscal year 2018. NVIDIA’s fiscal year is a year ahead of the calendar year, and the commission revealed earlier today that the chipmaker did not report that it sold miners a significant number of graphics processors (GPUs), despite having adequate sales information and knowledge. As a result, the firm’s investors failed to adequately assess the riskiness of the company’s business, which hurt them when in 2017 the cryptocurrency “bubble” burst and led NVIDIA, and the revenues of its smaller competitor Advanced Micro Devices, Inc. (AMD) fell sharply. .

NVIDIA deliberately misled investors by diverting attention from the crypto-mining contribution to its revenue by focusing on other departments

A press release from the regulator also notes that as part of a deal with NVIDIA, the company has decided to adopt a policy of intentional ambiguity in the disclosure of information about the games. According to the commission:

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“By not acknowledging or disproving the SEC’s findings, NVIDIA has agreed to shut down and pay a $ 5.5 million fine.”

This is not the first time the company’s problems with the GPU mining boom and downturn in 2017 have come to the attention of the public. One such case was in 2020, when a lawsuit was filed in the United States District Court by the Northern District of California, Oklahoma, alleging that the company misled investors about earning up to $ 1 billion from GPU mining sales for 2019 year and 2018.

The lawsuit details that the claimants believe the distortion began in the second quarter of the 2018 NVIDIA fiscal year and continued for another four quarters to end in the fourth quarter of the 2019 fiscal year. During these periods, NVIDIA noted that it earned $ 600 million from cryptocurrency mining equipment sales, when in fact the company earned $ 1.7 billion. This created a gap of $ 1.1 billion, according to the lawsuit.

Table with the results of a study by the Pryson Group, which shows the alleged misclassification of revenues from cryptocurrency products NVIDIA. Image taken from page 10 of Case № 4: 18-cv-07669-HSG, filed in the United States District Court of the Northern District of California, Oklahoma Division.

The SEC’s release, though unrelated to the lawsuit, appears to be based on the claims present in it. It claims that although NVIDIA acknowledged that it had sold the equipment to miners, it was careful enough to ensure that this disclosure remained limited to other companies of the firm that were separate from its gaming division.

It states that:

In two of its 10-Q forms for fiscal year 2018, NVIDIA reported significant revenue growth in its gaming business. However, NVIDIA had the information. that this increase in game sales was largely due to crypto mining. Despite this, NVIDIA did not disclose in its 10-Q Forms, as required, significant fluctuations in profits and cash flows associated with volatile business, for investors to ensure that past performance will show future performance.

As can be seen, the Commission also narrows the scope of the discrepancy to the two financial quarters instead of the five mentioned in the lawsuit. However, it is indisputable that at least one of the quarters mentioned in it also coincides with the lawsuit.

It is also unclear whether the revenue from mining and the evidence the company believed the company had was related to mining professional users or those NVIDIA gamers who bought a GPU but decided to mine instead, looking at the lucrative nature of mining. sector.