The US Securities and Exchange Commission (SEC) has revealed that they’ve settled charges against Nvidia for failing to adequately disclose the impact of cryptomining on their gaming business. As such, Nvidia has been fined USD5.5 million (~RM24.035 million) by the SEC, which Nvidia has agreed to pay.
The SEC—an independent agency of the US federal government who aims to prevent market manipulation—found that following Nvidia had failed to mention how significant of a role crypto played in its revenue growth from the sales of its graphics cards in two consecutive quarters in their 2018 fiscal year reports. This followed the rise cryptocurrency had in 2017, which saw more and more people buying Nvidia graphics cards for cryptocurrency mining.
“Nvidia’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market. All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate,” – Kristina Littman, Chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit
Nvidia’s failure to include cryptocurrency mining’s role in its revenue growth in 2018 turned out to be illegal, as these were earnings and fluctuations in an industry considered volatile. This type of information is deemed crucial for investors to determine the ‘likelihood that past performance was indicative of future performance’. Furthermore, the SEC also found Nvidia’s reports about its gaming hardware business’ growth to be misleading, given that Nvidia did acknowledge how other parts of their company were affected by cryptocurrency. This, according to the SEC, gave the impression that Nvidia’s gaming business was not affected by cryptocurrency.
Cryptocurrency eventually did have a crash in late 2018 that led to Nvidia cutting its quarterly earnings projections from USD2.7 billion to USD2.2 billion in January 2019. Nvidia were even sued over the issue by investors, but Nvidia ended up winning that lawsuit last year. Nevertheless, it’s important to note that Nvidia didn’t actually admit or deny the SEC’s findings, only agreeing to a cease-and-desist order and the USD5.5 million penalty, which may not seem like much when you remember that Nvidia made USD26.91 billion in revenue last year.