Nvidia has been charged $5.5 million by the US Securities and Exchange Commission for failing to disclose to investors how much of its 2017-2018 income comes from bitcoin miners.
The allegations and settlement with the company were confirmed by the SEC. The agency claims that Nvidia deceived investors by claiming a big growth in gaming-related revenue while hiding the extent to which its success was reliant on the far riskier cryptocurrency market.
Nvidia does not admit any wrongdoing as part of the agreement, but it does commit to stopping holding information. Graphics cards, such as those produced by Nvidia, are ideal for Ethereum mining. The price of ether soared from $10 to over $800 in 2017, prompting miners to invest in new equipment.
Nvidia Gaming Revenue Increases by 52% Nvidia’s gaming category, which is how the company reports these sales, increased by 52% on an annual basis in the second quarter of its 2018 fiscal year, and by 25% in the following quarter, according to the SEC, but the company failed to report the impact of cryptocurrency on this growth.
The SEC issued the following press release:
The SEC‘s order also finds that Nvidia’s omissions of material information about the growth of its gaming business were deceptive, given that Nvidia made statements about how demand for cryptocurrencies drove other parts of the company’s business, giving the impression that crypto-mining had little impact on the gaming business.
Investors were reportedly denied “crucial information to evaluate the company’s business is an important market,” according to Kristina Littman, chief of the SEC’s Enforcement Division.
Nvidia’s sales figures were not always indicative of future growth, which made an investment in the company worse, given the make-or-break nature of cryptocurrencies.
Cryptocurrency is a major Revenue Driver
According to the SEC, Nvidia analysts and investors were interested in how crypto mining affected the company’s gaming income and often questioned senior management about the extent to which improvements in gaming revenue during this time period were driven by such mining. Nvidia did not attribute the performance of its gaming segment to mining-related sales.
“Our GPUs are capable of cryptocurrency mining,” Nvidia’s chief financial officer Colette Kress said in February’s earnings comments, “but we have limited visibility into how this affects our total GPU demand.“
Meanwhile, it recognized cryptocurrency as a prominent component in other markets, indicating to the SEC that it was being intentionally deceptive.
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