NVIDIA Pays $5.5M SEC Cryptomining Disclosures Penalty
May 9, 2022
Securities and Exchange Commission settled charges against technology
company NVIDIA Corporation for inadequate disclosures concerning the
impact of cryptomining on the company’s gaming business.
The SEC’s order finds that, during consecutive quarters in NVIDIA’s
fiscal year 2018, the company failed to disclose that cryptomining was a
significant element of its material revenue growth from the sale of its
graphics processing units (GPUs) designed and marketed for gaming.
Cryptomining is the process of obtaining crypto rewards in exchange for
verifying crypto transactions on distributed ledgers. As demand for and
interest in crypto rose in 2017, NVIDIA customers increasingly used its
gaming GPUs for cryptomining.
In two of its Forms 10-Q for its fiscal year 2018, NVIDIA reported
material growth in revenue within its gaming business. NVIDIA had
information, however, that this increase in gaming sales was driven in
significant part by cryptomining. Despite this, NVIDIA did not disclose
in its Forms 10-Q, as it was required to do, these significant earnings
and cash flow fluctuations related to a volatile business for investors
to ascertain 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 given that NVIDIA did make statements about how other parts
of the company’s business were driven by demand for crypto, creating the
impression that the company’s gaming business was not significantly
affected by cryptomining.
disclosure failures deprived investors of critical information to
evaluate the company’s business in a key market,” said Kristina Littman,
Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit.
“All issuers, including those that pursue opportunities involving
emerging technology, must ensure that their disclosures are timely,
complete, and accurate.”
The SEC’s order finds that NVIDIA violated Section 17(a)(2) and (3) of
the Securities Act of 1933 and the disclosure provisions of the
Securities Exchange Act of 1934. The order also finds that NVIDIA failed
to maintain adequate disclosure controls and procedures. Without
admitting or denying the SEC’s findings, NVIDIA agreed to a
cease-and-desist order and to pay a $5.5 million penalty.
The SEC’s investigation was conducted by Brent Wilner of the Crypto
Assets and Cyber Unit, and supervised by Diana Tani and Ms. Littman of
the Crypto Assets and Cyber Unit.
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