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SEC Fines Nvidia $5.5 Million for Insufficient Crypto Disclosures

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Nvidia will pay $5.5 million to settle charges from the United States Securities and Exchange Commission (SEC) that the company's disclosures regarding the effect of cryptomining on its gaming arm were insufficient.

The SEC order states that Nvidia "failed to disclose... that cryptomining was a significant factor in year-over-year growth in the company's gaming revenue" during consecutive quarters in its 2018 fiscal year. In Forms-10Q for that year, the SEC charges that Nvidia's reports of "material growth" in its gaming business were driven in "significant part" by cryptomining but that the company omitted that fact.       

The order alleges that during Q2 and Q3 of 2018, "certain crypto asset prices rose, [and] users of NVIDIA's GPUs were increasingly performing cryptomining."

According to the Commission, the company's actions violated parts of the Securities Act of 1933 and provisions in the Securities Exchange Act of 1934.

"NVIDIA’s disclosure failures deprived investors of critical information to evaluate the company’s business in a key market,” Kristina Littman, chief of the SEC Enforcement Division’s Crypto Assets and Cyber Unit, said in a press release. "All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate."

An Nvidia spokesperson declined to comment to Tom's Hardware on the matter. According to the SEC, Nvidia agreed to a cease-and-desist order and is paying a $5.5 million fine, but has neither admitted to or denied the SEC's charges.

That fine is a slap on the wrist for Nvidia, which in 2018 made $9.7 billion in revenue and $3 billion in profit. In 2021, the company made $26 billion in revenue and approximately $9.7 billion in profit. 

Nvidia's GPUs have been in short supply throughout the pandemic due to Covid-related shipping and production issues, high demand for new gaming PCs as people stayed inside, and cryptomining. Of course, it didn't help that scalpers got in on buying up graphics cards to resell at high prices to cut a profit.

In early 2021, Nvidia converted some Turing silicon to its CMP product line, which features GPUs explicitly designed for cryptomining.  

During the last few months, graphics cards from both Nvidia and AMD have been slowly returning to the manufacturer's suggested retail prices, meaning that increasing numbers of graphics cards are going to people who are putting them in their PCs to play video games.





Andrew E. Freedman is a senior editor at Tom's Hardware focusing on laptops, desktops and gaming. He also keeps up with the latest news. A lover of all things gaming and tech, his previous work has shown up in Tom's Guide, Laptop Mag, Kotaku, PCMag and Complex, among others. Follow him on Twitter: @FreedmanAE

  • digitalgriffin
    This is a slap on the wrist.

    The question becomes "Does NVIDIA have first hand knowledge of how many of their GPUs are being used for mining?" We already know NVIDIA looks at a lot of what you use your PC for through the "NVIDIA experience" program. AMD does the same thing. "Oh you play these games? Let me recommend more expensive products in our lineup to make your game better."

    A simple binary check of the calling program for known miners is easy. But that wouldn't cover custom drivers by mining farms. So you would have to assume all those are mining GPUs. For example: "54 million out of 80 million are used for mining on Linux/Windows using official drivers. 125 million are using custom drivers so we assume they are used for mining. That gives 87% mining use"
    Reply
  • InvalidError
    How is Nvidia supposed to accurately represent the proportion of its GPUs going to crypto? At best, it is the AIBs doing bulk sales to large crypto farms and Nvidia's reporting beyond crypto-specific ASIC part numbers cannot be more accurate than whatever it gets from AIBs.
    Reply
  • Sleepy_Hollowed
    The jpeg receipts and the pump and dump Monopoly money is tanking, so nvidia is getting hit about what they should’ve been tracking the moment they discovered miners used this for.

    it doesn’t help that they didn’t care to throttle those sales or have an actual channel to make those sales, or mandate resellers to track those.
    Reply
  • hotaru251
    lul.....5M dollars?

    might as well of asked for $5 as thats what it feels like to them.
    Reply
  • digitalgriffin
    InvalidError said:
    How is Nvidia supposed to accurately represent the proportion of its GPUs going to crypto? At best, it is the AIBs doing bulk sales to large crypto farms and Nvidia's reporting beyond crypto-specific ASIC part numbers cannot be more accurate than whatever it gets from AIBs.

    If NVIDIA ships 100,000,000 chipsets, then that's 100,000,000 chipsets they have to account for. They know how many they produce. The software will report what it's used for along with a serial #. It's not rocket science. Anything that doesn't report has to be assumed to be used for mining as it's using custom drivers commonly used by miners.

    The point is the market wants to know what part of NVIDIA's market is actually gamers. Gamers will use official drivers. Official software will report this. So if only 1,000,000 report back to home as gaming only, then that's 1%. The gamer market is a lot less vulnerable to fluctuations compared to mining valuations.
    Reply
  • Phaaze88
    Yeah, what the heck? Multi billion dollar company, ~Hello!
    What's a few million that they'll make back in a month...

    This whole thing is LULZ...
    Reply
  • Metteec
    Phaaze88 said:
    What's a few million that they'll make back in a month...

    Times up. Actually, they actually made it back in 4.5 hours. Last year, they earned income of $9.8 billion, which is $1.125 million per hour.
    Reply
  • InvalidError
    digitalgriffin said:
    If NVIDIA ships 100,000,000 chipsets, then that's 100,000,000 chipsets they have to account for. They know how many they produce. The software will report what it's used for along with a serial #. It's not rocket science. Anything that doesn't report has to be assumed to be used for mining as it's using custom drivers commonly used by miners.
    AFAIK, Nvidia's drivers don't phone home. Every instance I could find of "Nvidia drivers phoning home" are related to GeForce Experience and you can simply choose not to install that.
    Reply
  • digitalgriffin
    InvalidError said:
    AFAIK, Nvidia's drivers don't phone home. Every instance I could find of "Nvidia drivers phoning home" are related to GeForce Experience and you can simply choose not to install that.

    Last I checked, GeForce experience is almost mandatory now. Automated driver updates, and things like shadowplay require it.
    Reply
  • InvalidError
    digitalgriffin said:
    Last I checked, GeForce experience is almost mandatory now. Automated driver updates, and things like shadowplay require it.
    It may feel mandatory to you. They are don't-cares for me. The only time I installed Experience on my PC was the first time I installed my GTX1050 in my previous PC and that was long before it required an account. That's when I realized I wasted 250MB on something I had no use for, removed it and never bothered again.
    Reply