The U.S. Securities and Exchange Commission said Friday it has settled charges against technology company Nvidia Corporation for allegedly failing to disclose cryptomining’s impact on its gaming division.
The SEC filing notes how Nvidia failed to disclose how cryptocurrency mining propelled growth in the second and third fiscal quarters of 2018, which took place in 2017.
“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,” reads part of the filing.
Cryptomining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers, according to the SEC website.
NVIDIA reported material growth in gaming revenue in two of its Forms 10-Q for the fiscal year 2018. The company knew that cryptomining was a major contributor to this increase in gaming sales. However, this information was not disclosed in its 10-Q reports so investors could determine the likelihood that past performance was indicative of future performance.
A new card called Cryptocurrency Mining Processor was released by Nvidia in early 2021. In order to prevent mining, the company added software to its graphics cards. The pandemic, however, drove users to upgrade their home gaming PCs in 2020 and 2021, driving Nvidia’s graphics cards into short supply.
″CMP products — which don’t do graphics — are sold through authorized partners and optimized for the best mining performance and efficiency,” Matt Wuebbling, marketing head of Nvidia’s GeForce wrote in a blog post.
Initially designed for high-definition computer games, graphics cards are now essential to new technologies, such as artificial intelligence.
“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.
NVIDIA agreed to pay $5.5 million in penalties without acknowledging or denying the SEC’s findings.