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The SEC announced settled charges against technology company NVIDIA Corporation for inadequate disclosures concerning the impact of cryptomining on the company’s gaming business.

The SEC’s order finds that, during consecutive quarters in NVIDIA’s fiscal year 2018, the company failed to disclose that cryptomining was a significant element of its material revenue growth from the sale of its graphics processing units (GPUs) designed and marketed for gaming. Cryptomining is the process of obtaining crypto rewards in exchange for verifying crypto transactions on distributed ledgers. As demand for and interest in crypto rose in 2017, NVIDIA customers increasingly used its gaming GPUs for cryptomining.

In two of its Forms 10-Q for its fiscal year 2018, NVIDIA reported material growth in revenue within its gaming business according to the SEC. NVIDIA had information, however, that this increase in gaming sales was driven in significant part by cryptomining. Despite this, NVIDIA did not disclose in its Forms 10-Q, as it was required to do, these significant earnings and cash flow fluctuations related to a volatile business for investors to ascertain the likelihood that past performance was indicative of future performance. The SEC’s order also finds that NVIDIA’s omissions of material information about the growth of its gaming business were misleading given that NVIDIA did make statements about how other parts of the company’s business were driven by demand for crypto, creating the impression that the company’s gaming business was not significantly affected by cryptomining.

Specifically, the SEC alleged that NVIDIA’s analysts and investors were interested in understanding the extent to which the company’s Gaming revenue was impacted by cryptomining, and routinely asked senior management about the extent to which increases in Gaming revenue during this time frame were driven by cryptomining. In light of the volatility of certain crypto asset prices during this time frame, investors and analysts probed the significance of cryptomining to NVIDIA’s Gaming business to determine how sustainable the contributions to the company’s largest specialized market would be going forward.

The SEC also addressed disclosure controls and procedures.  Even though NVIDIA had information indicating that cryptomining was a significant factor in the year-over-year growth in revenue for the company’s GPUs for Gaming in its GPU business segment during the relevant period, NVIDIA failed to maintain disclosure controls or procedures designed to ensure that information required to be disclosed in NVIDIA’s results of operations was reported as required by the MD&A provisions of Regulation S-K, Item 303.

NVIDIA did not admit or deny the SEC’s findings.