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After the US Securities and Exchange Commission (SEC) sanctioned major US chip company Nvidia for failing to adequately disclose to investors the true impact of cryptocurrency mining on its gaming business, it agreed to pay a $5.5 million fine without acknowledging or contesting the claims.
According to a Securities and Exchange Commission report, Nvidia failed to disclose that its GPUs or GPUs are increasingly being used in cryptocurrency mining and that this was a major part of its physical revenue growth over the course of consecutive quarters of fiscal 2018, as prices soared. Cryptocurrencies and the global shortage of chips entrenched.
In the report, the committee noted that: “Nvidia’s senior management internally expressed a desire to obtain crypto mining demand, while protecting its gaming business from crypto miners and protecting the supply of GPUs to gamers.”
As a result, Nvidia launched a line of cryptocurrency mining processors, known as ‘CMP’, which the company marketed to large cryptocurrency mining operations. Nvidia’s Models 10-Q for the second and third fiscal quarters of 2018 reported CMP sales in the reportable GPU segment within OEM revenue for PC.
“Based on well-known CMP sales, the company identified crypto mining as a significant component of OEM GPU sales within its GPU segment revenue in the company’s quarterly reports,” the report further stated.
Nvidia produced a range of cryptocurrency mining processors and later sold them to crypto enthusiasts. However, the report claimed that Nvidia employees were aware that crypto mining had led to an increase in GPU purchases, particularly in China.
According to the report, “While the company was unable to track when and which GPUs were purchased for games and which ones were for cryptocurrency mining, company employees estimated using various assumptions that the impact of crypto mining was at levels indicating that crypto mining was significant. factor in the annual growth in gaming revenue over the relevant period.”
Compared to the same period in the previous fiscal year, the company enjoyed overall growth and increased gaming income, according to the SEC report. Nvidia’s gaming revenue grew 52% year-over-year in the second fiscal quarter of 2018 and 25% year-over-year in the third fiscal quarter of 2018.
However, Christina Littmann, head of crypto assets and the Internet unit of the SEC’s Law Enforcement Division, stated that failure to disclose critical information deprived investors of the ability to properly assess the company’s gaming operations.
“Nvidia’s disclosure failure has deprived investors of information critical to evaluating the company’s business in the key market. All issuers, including those pursuing opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”
Meanwhile, the SEC said last week that it will increase the number of enforcement teams focused on crypto assets and Internet-related issues. Crypto-assets and CyberUnit, previously known as CyberUnit, will get 20 new team members, bringing the total number of team members to 50.
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