Nvidia Shares Plunge After SEC Finds “Inadequate Disclosures” For Crypto-Mining Business

Nvidia Corporation shares tumbled on Friday morning after the Securities and Exchange Commission (SEC) announced that it “settled charges against” the company “for inadequate disclosures concerning the impact of crypto-mining on the company’s gaming business.”

The SEC found that Nvidia’s fiscal year 2018 failed to disclose that crypto-mining was a “significant element of its material revenue growth from the sale of its graphics processing units (GPUs) designed and marketed for gaming.” 

In two of its Forms 10-Q for its fiscal year 2018, NVIDIA reported material growth in revenue within its gaming business. NVIDIA had information, however, that this increase in gaming sales was driven in significant part by crypto-mining.

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 crypto-mining. -SEC

The agency said Nvidia “agreed to a cease-and-desist order” and has paid a $5.5 million fine. The US-based semiconductor company didn’t admit or deny the SEC’s findings. 

Nvidia shares tumbled as much as 4.5% on Friday morning following the report. 

“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 SEC Enforcement Division’s Crypto Assets and Cyber Unit. 

Littman added: “All issuers, including those that pursue opportunities involving emerging technology, must ensure that their disclosures are timely, complete, and accurate.”

Earlier this week, the SEC doubled its cryptocurrency fraud department, a move to curb fraudulent activities in the hot digital space.