Nvidia & SEC Reach $5.5 Million Settlement
Nvidia and the SEC have reached a $5.5 million settlement following the tech company's failure to reveal the true effect cryptocurrency mining had on its gaming division during two financial quarters in 2018.
"Without admitting or denying the SEC’s findings, NVIDIA agreed to a cease-and-desist order and to pay a $5.5 million penalty," reads a release from the SEC.
Nvidia first mentioned crypto mining and its impact on their graphics processing unit (GPU) sales in August of 2017. When it was almost impossible to find a GPU at MSRP, much like it is nowadays but for a different set of reasons.
“Our PC OEM revenue increased by approximately 200% due primarily to strong demand for GPU products targeted for use in cryptocurrency mining,” The company wrote in a quarterly filing during the summer of 2017, pointing out the significant increase in its GeForce GPU product line had by 90%, mainly due in part, to their in a surge in crypto mining.
But the company still failed to disclose that its gaming business had also seen an increase in the popularity among crypto miners.
“Nvidia’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market,” said Kristina Littman, the SEC’s cyber unit chief. “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”
The Geforce GTX 580 was the first card adopted by crypto miners, though it was released with gaming in mind, leading Nvidia to be none the wiser when the card had a sudden increase in sales due to new customers in the mining space.
In November of 2018, the demand for cards slowly stopped, CEO at the time, Jensen Huang, claimed it was impossible to know the amount of hardware being bought for mining proposes.
“My point is that we just don’t know — when we’re going through what we see as our own sales, and what the percentage of Bitcoin is in our own sales, what we don’t know is how much inventory AMD pushed into the channel,” he told VentureBeat. “There’s no way for us to calculate that.”
In another quarterly report filed on May 18th, 2018, for the three months ending on April 29th of that year, Nvidia gave credit to its increases in sales to eSports.
“GPU business revenue was $2.77 billion, up 77% from a year earlier and up 12% sequentially, led by gaming and datacenter,” the company wrote in an SEC filing. “Gaming revenue was up 68% from a year ago and down 1% sequentially. Gaming GPU growth was fueled by demand from gamers playing eSports, the momentum of the Battle Royale genre, and AAA cinematic games.”
While this could be true due to the rise in popularity of games like Players Unkown Battleground, and Fortnite, both mainly played on PC at the time, racking in numbers unseen before, looking into cryptos zeitgeist around these months, it seems these quarters line up with the first boom we had in the industry, right before the first crash.