The United States Securities and Exchange Commission, or SEC, has announced that it has settled charges against Nvidia — the company behind graphics cards used by many crypto miners — in regards to “inadequate disclosures.”
In a Friday announcement, the SEC said that Nvidia failed to disclose that mining cryptocurrencies was “a significant element of its material revenue growth” based on sales of its graphics processing units, or GPUs, during the 2018 fiscal year. The company has agreed to pay a $5.5 million penalty and will be subject to a cease-and-desist order based on violations of the Securities Act of 1933 and disclosures required by the Securities Exchange Act of 1934.
According to the SEC, Nvidia reported growth in revenue around its gaming business in 2018, but also had information attributing this rise to crypto mining. The firm was required to report the connection “related to a volatile business,” and by not doing so was misleading investors by failing to disclose the demand for crypto mining.
“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 Crypto Assets and Cyber Unit of the SEC’s Enforcement Division. “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”
Today we announced settled charges against NVIDIA Corporation for inadequate disclosures concerning the impact of cryptomining on the company’s gaming business.
— U.S. Securities and Exchange Commission (@SECGov) May 6, 2022
The action from the SEC’s crypto enforcement unit was the first since the government agency announced plans to expand its Cyber Unit — which includes the crypto assets enforcement division — by 20 people in an effort to better “police wrongdoing in the crypto markets.” The SEC reported in January that between 2013 and the end of 2021, it has brought 97 enforcement actions against participants in the digital asset marketplace, costing them roughly $2.35 billion in penalties.
Related: Crypto firms may still face SEC penalties for self-reporting securities laws violations: Report
Though Nvidia agreed to pay penalties and face enforcement actions in this SEC case, the firm has previously had success around similar allegations in civil court. In March 2021, a federal judge granted Nvidia’s legal team’s request to dismiss a lawsuit alleging the GPU manufacturer had acted with “conscious recklessness” in failing to disclose that a significant amount of revenue from 2017 and 2018 came from crypto miner sales.