SEC fines NVIDIA for ambiguities in its role in cryptocurrency mining

The US Securities and Exchange Commission (SEC) has filed a lawsuit against video card maker NVIDIA. According to the lawsuit, the company was notified for not clarifying the impact of cryptocurrency mining on its results.

NVIDIA agreed to pay a fine of US$5.5 million. Thus, an agreement and payment of the fine closed the case. But the company did not disclose the financial impact of mining on its results.

Since demand and interest in cryptocurrencies increased in 2017, mining activity has also grown. As mining BTC (BTC) became financially unfeasible, many people turned to cryptocurrencies with simpler algorithms to use.

Among these cryptocurrencies are Ether (ETH) and Monero (XMR), among others that use graphics cards (GPU). As GPUs are NVIDIA’s specialty, the company has been a major player in supplying to mining facilities.

Inappropriate disclosures

The statement states that NVIDIA has included revenue from GPU sales to cryptocurrency miners as part of its gaming business. Therefore, the increase in the company’s revenue was accounted for as profits from sales to PC gamers.

However, the SEC stated that NVIDIA should have differentiated the two types of revenue. After all, NVIDIA’s tax report says that part of the company’s income came from graphics card sales, but it didn’t reveal that this increase was driven in significant part by the cryptocurrency market.

Furthermore, the SEC found that NVIDIA did not specify how demand for cryptocurrencies affected another part of its business. This gave the impression that their gaming operations were not closely correlated with their mining involvement.

In this regard, the SEC found that these omissions of critical information prevented investors from properly assessing the company’s future performance. Therefore, they hampered the transparency that is required of listed companies.

Kristina Littman, head of the crypto assets and cyber unit at the SEC’s Enforcement Division, cited the company. The executive argued that NVIDIA’s failure deprived investors of the opportunity to assess its performance fairly.

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

Looking at the Metaverse

The use of GPUs for cryptocurrency mining is a hot topic for NVIDIA and its customers. The activity was even blamed for the increase in GPUs between 2018 and 2020. In fact, many players complained to the company and asked for solutions to contain these increases.

In response to requests, the company installed software to limit cryptocurrency mining on GPUs. In 2021, NVIDIA launched an exclusive card model for ETH mining, aiming to unburden the price of other cards.

Earlier this year, the company decided to bet its chips on the growth of Metaverse. As CriptoFácil reported, NVIDIA has launched Omniverse, a program to support artists and content creators who focus on building virtual worlds and products.