The United States Securities and Exchange Commission (SEC) announced yesterday that it had fined NVidia $5.5 million for failing to notify its investors that cryptocurrency mining operations impacted its sales of gaming GPU.
GPU mining involves using gaming computer GPUs to solve complex math problems in verifying transactions on blockchains using a proof-of-work system and Ethash algorithm that dynamically adjusts mining difficulties in blockchains.
Over the years, NVidia’s gaming GPU has been used to mine cryptocurrencies like Bitcoin and Ethereum, among others. But the use of GPUs is gradually becoming obsolete in cryptocurrency mining as they are being replaced by application-specific integrated circuits (ASICs).
The fine against NVidia stems from the fact that it failed to disclose to its investors that cryptocurrency mining was a significant component of its revenue growth in 2017 and also concealed the fact that the company’s revenue growth was not directly attributable to its gaming GPU business contrary to what it claims.
Additionally, Nvidia’s failure to disclose this deprived its investor of the essential information they needed to evaluate the company’s business and make important decisions,
“NVIDIA’s 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.”
Also, miners’ high demand for Nvidia’s GPU for crypto mining between 2017 and 2018 caused a shortage of gaming GPU. However, the company could have avoided the fine by disclosing the potential impact of cryptocurrency mining on its gaming GPU demand in its Form 10-Q filing.
According to SEC,
“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 crypto mining.”
Against this background, the company has agreed to cease and desist order relief and will pay the $5.5 million fine. However, the company did not agree or deny the wrongdoing as part of the settlement.