Nvidia Agrees to Pay $5.5 Million to Settle SEC Probe Over Cryptomining Disclosure

Nvidia, which is based in Santa Clara, Calif., settled the SEC’s allegations without admitting or denying the claims. A representative for the company declined to comment. Nvidia’s shares fell about 2% Friday.

Nvidia’s powerful GPUs have been popular with people who use them to run complex mathematical functions that unlock new units of cryptocurrencies such as ether. The company now produces GPUs designed specifically for cryptomining operations.

Before its 2018 fiscal year, cryptomining didn’t meaningfully impact Nvidia’s sales of GPUs, the SEC said. That changed as rising prices for cryptocurrencies drove greater demand for Nvidia’s GPUs, particularly in China.

The company’s gaming revenue, which included sales of chips used for cryptomining, rose 52% in the second quarter of its 2018 fiscal year compared to the same period one year prior, and 25% during the third quarter of that year, the SEC said in a settlement order. Investors and analysts who followed the company “routinely asked senior management about the extent to which increases in gaming revenue during this time frame were driven by cryptomining,” according to the SEC’s order.

Nvidia couldn’t track which specific chips were purchased for the purpose of cryptomining, the SEC said. But some salespeople reported internally what they believed was significant year-over-year increases in demand due to cryptomining, the SEC said.

Nvidia disclosed in one securities filing that cryptomining was a significant part of one sub-segment of product sales, but the reporting didn’t sufficiently address whether that trend would continue, fluctuate, or cease in the future, the SEC said.

Public companies are supposed to disclose known trends and uncertainties that can materially impact their financial performance, but Nvidia didn’t report the big influence of cryptomining on the growth of gaming sales until the end of its 2018 fiscal year, the SEC said.

“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’s Crypto Assets and Cyber Unit.

Demand for some of Nvidia’s GPUs slipped in late 2018 as prices for cryptocurrencies crashed. Nvidia said at the time that it expected crypto-related revenue to be negligible in the future.

Nvidia now says crypto’s price volatility, as well as evolving standards for technology and government regulation, make it difficult for the company to estimate “with any reasonable degree of precision” the impact of cryptomining on its business, according to its most recent annual report issued in March.

Write to Dave Michaels at [email protected]

Corrections & Amplifications
The SEC said Nvidia’s sales of its GPUs were materially boosted in its 2018 fiscal year by consumers who bought them to mine new units of cryptocurrencies. An earlier version of this article incorrectly said the period was calendar year 2018. (Corrected on May 6)

Nvidia, which is based in Santa Clara, Calif., settled the SEC’s allegations without admitting or denying the claims. A representative for the company declined to comment. Nvidia’s shares fell about 2% Friday.

Nvidia’s powerful GPUs have been popular with people who use them to run complex mathematical functions that unlock new units of cryptocurrencies such as ether. The company now produces GPUs designed specifically for cryptomining operations.

Before its 2018 fiscal year, cryptomining didn’t meaningfully impact Nvidia’s sales of GPUs, the SEC said. That changed as rising prices for cryptocurrencies drove greater demand for Nvidia’s GPUs, particularly in China.

The company’s gaming revenue, which included sales of chips used for cryptomining, rose 52% in the second quarter of its 2018 fiscal year compared to the same period one year prior, and 25% during the third quarter of that year, the SEC said in a settlement order. Investors and analysts who followed the company “routinely asked senior management about the extent to which increases in gaming revenue during this time frame were driven by cryptomining,” according to the SEC’s order.

Nvidia couldn’t track which specific chips were purchased for the purpose of cryptomining, the SEC said. But some salespeople reported internally what they believed was significant year-over-year increases in demand due to cryptomining, the SEC said.

Nvidia disclosed in one securities filing that cryptomining was a significant part of one sub-segment of product sales, but the reporting didn’t sufficiently address whether that trend would continue, fluctuate, or cease in the future, the SEC said.

Public companies are supposed to disclose known trends and uncertainties that can materially impact their financial performance, but Nvidia didn’t report the big influence of cryptomining on the growth of gaming sales until the end of its 2018 fiscal year, the SEC said.

“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’s Crypto Assets and Cyber Unit.

Demand for some of Nvidia’s GPUs slipped in late 2018 as prices for cryptocurrencies crashed. Nvidia said at the time that it expected crypto-related revenue to be negligible in the future.

Nvidia now says crypto’s price volatility, as well as evolving standards for technology and government regulation, make it difficult for the company to estimate “with any reasonable degree of precision” the impact of cryptomining on its business, according to its most recent annual report issued in March.

Write to Dave Michaels at [email protected]

Corrections & Amplifications
The SEC said Nvidia’s sales of its GPUs were materially boosted in its 2018 fiscal year by consumers who bought them to mine new units of cryptocurrencies. An earlier version of this article incorrectly said the period was calendar year 2018. (Corrected on May 6)