Nvidia is expected to pay $5.5 million to settle charges after the company was accused of obscuring the number of graphics cards sold to cryptocurrency miners.
The US Securities and Exchange Commission or SEC announced that the charges and a settlement were made with the company on Saturday, May 7.
Nvidia to Pay Charges to SEC
SEC claims that Nvidia misled investors by reporting a massive boost in revenue related to gaming, hiding how much its success relied on the far more volatile crypto market, according to The Verge.
Nvidia is not admitting any wrongdoing as part of the settlement, but it agrees to stop any unlawful failure to disclose information.
The charges stem from the company's fiscal year 2018 financial reports. The SEC notes Nvidia saw an explosion in crypto mining-related sales back in 2017 when the rewards of mining Ethereum grew dramatically.
Crypto mining was widely reported as a cause of GPU scarcity. The company launched a separate CMP line specifically for crypto mining, attempting to prevent any shortages for gamers, according to CNET.
However, the employees apparently acknowledged that many gaming GPUs were still going to miners. The order says that the company's sales personnel in China reported what they believed to be significant increases in demand for Gaming GPUs as a result of crypto mining.
Given the boom-and-bust nature of cryptocurrency, this meant the company's sales numbers did not necessarily indicate reliable future growth, making investing in it riskier.
The SEC alleges that NVIDIA's analysts and investors were interested in understanding the extent to which the company's Gaming revenue was impacted by crypto mining and repeatedly asked senior management about the extent to which increases in gaming revenue during this time frame were driven by crypto mining.
Despite this, the company did not mention mining-related sales as a factor in its gaming division's success. Meanwhile, it mentioned crypto as an important factor in other markets, which suggested to the SEC that it was being deceptive.
The investors' anxieties turned out to be well-founded. A crypto crash in late 2018, together with a weakening Chinese market, led it to slash its quarterly earnings projections by $500 million and resulted in a shareholder lawsuit.
SEC Crypto Assets and Cyber Unit head Kristina Littman said that NVIDIA's disclosure failures deprived investors of critical information to evaluate the company's business in a key market and that all issuers, including those that pursue different opportunities involving emerging technology, must make sure that their disclosures are complete, accurate, and timely.
How Cryptomining Works?
According to Business Today, crypto mining is an important part of the crypto network's method for getting consensus on the ledger's current state.
There is no central authority that decides whether or not transactions should be structured to fit into the new blocks. Instead, the state of the ledger is established cooperatively and through coordination among the nodes.
The majority of nodes verify the transaction validity, store the ledger, and inform other nodes of modifications. Only miners who have completed the Proof of Work are eligible to add a new block.
Related Article: ASUS Gears Up to Release Cryptomining GPU Priced at $799: ASUS CMP 30HX D6 6G
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Written by Sophie Webster
