Nvidia Accused of Misleading Investors About Cryptocurrency Mining

For years, video game players have blamed cryptocurrency enthusiasts for the shortage of computer graphics cards, which have purchased an increasing number of devices to generate digital currencies.

The pandemic, along with tariffs by the administration of former US President Donald Trump on Chinese imports, have only worsened the situation, leading to soaring retail and aftermarket prices.

Now, US securities regulators say that graphics giant Nvidia knew that cryptocurrency miners were consuming sales of components intended for gaming – and therefore potentially contributing to supply issues – but illegally concealed that fact from investors who asked repeatedly about the impact of cryptocurrency mining on Nvidia.

The U.S. Securities and Exchange Commission (SEC) said Nvidia would pay $5.5 million to resolve allegations of improper disclosure, adding in a statement that the company’s “material information omissions were misleading. ”. Nvidia declined to comment.

The order marks another sign of the SEC’s emerging focus on virtual currencies. The agency separately announced this week that it is hiring another 20 people to investigate and prosecute cryptocurrency fraud and cybercrime.

It also validates concerns that computer gamers have been increasingly forced to compete with the cryptocurrency industry as coin generation like ethereum has become more computationally demanding.

The SEC claims focus on Nvidia’s quarterly reports in fiscal 2018, when graphics cards began to be used to mine virtual currencies.

As the value of coins like ethereum grew, “some of Nvidia’s sales staff expressed their belief that much of the increased demand for the company’s gaming products, particularly in China, was being driven by cryptomining,” it said. the order of the SEC.

Senior company executives sought to capitalize on this demand with a specialized lineup of cryptomining-only cards, the SEC wrote, but Nvidia sellers and the company’s internal estimates suggested that cryptomining still accounted for “a significant factor year-over-year, growth in gaming revenue.”

In the company’s quarterly reports, Nvidia reported revenue increases of 52% and 25% for the second and third quarters of 2018, respectively, compared to the same quarters a year earlier, according to the SEC.

“The company’s analysts and investors were interested in understanding the extent to which Nvidia’s gaming revenue was impacted by cryptocurrency mining, and routinely asked senior management about the extent to which increases in gaming revenue during this period were driven by cryptocurrency mining. cryptocurrency mining,” the SEC wrote.

But since Nvidia didn’t mention cryptomining’s role in the numbers – although it aptly cites cryptomining in other areas of its report – it gave the misleading impression that the brand’s gaming growth was sustainable or organic, not due to demand for a digital currency. volatile, the SEC said.

“Nvidia’s disclosure failures have deprived investors of critical information for evaluating the company’s business in a key market,” Kristina Littman, who leads the SEC’s cyber and assets unit, said in a statement.

“All issuers, including those seeking opportunities involving emerging technology, must ensure that their disclosures are timely, complete and accurate.”