Nvidia agreed to pay $5.5 million in SEC fine for failure to disclose the impact of crypto mining on its gaming business

In February 2021, we wrote about Invidia after the gaming chip giant unveiled its GeForce RTX 3060 processor chip dedicated to Ethereum mining. Also known as the Cryptocurrency Mining Processor (CMP), the product is geared toward miners that would use traditional GPUs to mine ETH and other cryptocurrencies.

Fast forward a little over a year later, the company is now in hot water for failure to disclose that crypto mining was a “significant element” of its revenue growth a year earlier.

Today, the U.S. Securities and Exchange Commission (SEC) said that Nvidia Corporation has agreed to pay $5.5 million to settle civil charges that the chip giant did not properly disclose the impact of crypto mining on its gaming business.

In a news release on its website, the agency said, “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. Cryptomining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers. As demand for and interest in crypto rose in 2017, NVIDIA customers increasingly used its gaming GPUs for cryptomining.”

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

Nvidia neither admits nor denies the SEC’s findings. Instead, the firm agreed to pay a civil penalty of $5.5 million. A spokesperson for Nvidia did not respond immediately to a request for comment.

In recent years, crypto mining has become a lucrative business as entrepreneurs saw opportunities to mine their own bitcoin amid surging bitcoin prices. Cryptomining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers, according to the SEC website.

“The SEC’s order finds that NVIDIA violated Section 17(a)(2) and (3) of the Securities Act of 1933 and the disclosure provisions of the Securities Exchange Act of 1934. The order also finds that NVIDIA failed to maintain adequate disclosure controls and procedures. Without admitting or denying the SEC’s findings, NVIDIA agreed to a cease-and-desist order and to pay a $5.5 million penalty,” SEC wrote.