NVIDIA fined $5.5 million over failure to disclose sales to cryptocurrency miners

[Redaktion]

NVIDIA has settled charges levied against it by the United States Security and Exchange Commission (SEC). As a part of the settlement, the GPU manufacturer will pay a US$5.5 million penalty. The SEC charged NVIDIA with a failure to disclose that sales to cryptominers made up a significant portion of the company's growth in 2018.

https://www.notebookcheck.net/NVIDIA-fined-5-5-million-over-failure-to-disclose-sales-to-cryptocurrency-miners.617722.0.html

[mixedfish]

The fine to them is just the cost of doing business compared to the billions of dollars made by holding no one accountable to the high escalated prices.

[_MT_]

The fine to them is just the cost of doing business compared to the billions of dollars made by holding no one accountable to the high escalated prices.

This has nothing to do with prices. It's all about not informing investors properly. If you're investing, you should understand the risk. You need information to evaluate it. And corporations have to provide it.

It's normal that prices rise when demand rises. That's how market works. When there isn't enough for everybody, you need to decide who gets it and who doesn't. And needs differ. It's more important to some people than others. Market uses price for that. The more you're willing to pay, the more you need it. That's the basic idea. There is nothing illegal about it. And yes, by that definition, miners need cards more than you do. If you're using a hardware to make money, you'll probably be willing to pay more for it than someone who just uses it for fun. And you probably actually need it more if your income depends on it. And it's probably a better resource allocation for the economy as well.

In fact, this is what makes a market economy superior to a centrally planned one. Because no single entity can understand the needs of all the players. The company actually has a duty to make profit. That's its raison d'être. If management chooses a less profitable path, they've got to have a very good reason for it. Yes, this system has its limits. E.g. it's not good when you're dealing with goods essential to survival and large differences in purchasing power where "not having" isn't really an option. And that's where central planning can work as it's feasible to determine the minimum for survival. But it generally works well for things you can live without. And this is why it's important for the price to include everything, including e.g. environmental costs. Hidden costs are what cripples the system.

[vertigo]

The fine to them is just the cost of doing business compared to the billions of dollars made by holding no one accountable to the high escalated prices.

This has nothing to do with prices. It's all about not informing investors properly. If you're investing, you should understand the risk. You need information to evaluate it. And corporations have to provide it.

It's normal that prices rise when demand rises. That's how market works. When there isn't enough for everybody, you need to decide who gets it and who doesn't. And needs differ. It's more important to some people than others. Market uses price for that. The more you're willing to pay, the more you need it. That's the basic idea. There is nothing illegal about it. And yes, by that definition, miners need cards more than you do. If you're using a hardware to make money, you'll probably be willing to pay more for it than someone who just uses it for fun. And you probably actually need it more if your income depends on it. And it's probably a better resource allocation for the economy as well.

In fact, this is what makes a market economy superior to a centrally planned one. Because no single entity can understand the needs of all the players. The company actually has a duty to make profit. That's its raison d'être. If management chooses a less profitable path, they've got to have a very good reason for it. Yes, this system has its limits. E.g. it's not good when you're dealing with goods essential to survival and large differences in purchasing power where "not having" isn't really an option. And that's where central planning can work as it's feasible to determine the minimum for survival. But it generally works well for things you can live without. And this is why it's important for the price to include everything, including e.g. environmental costs. Hidden costs are what cripples the system.

All true, but @mixedfish is still correct, at least in the main point it seems they were making, which is that companies continue to violate the rules because these "fines" aren't even close to a discouragement. Such a small amount compared to the amount they made in that time is a mere write-off. It doesn't affect them. Meanwhile, fines applied to individuals who mess up on their taxes, for example, can have devastating consequences. As usual, the system is messed up and favors the large corporations, allowing them to do as they please without fear of real punishment.

[slw]

Delivering something like 100 pcs/country/month to official sellers under whole 2021, reporting millions sold. Go figure investor!

[t4n0n]

The fine to them is just the cost of doing business compared to the billions of dollars made by holding no one accountable to the high escalated prices.

This has nothing to do with prices. It's all about not informing investors properly. If you're investing, you should understand the risk. You need information to evaluate it. And corporations have to provide it.

It's normal that prices rise when demand rises. That's how market works. When there isn't enough for everybody, you need to decide who gets it and who doesn't. And needs differ. It's more important to some people than others. Market uses price for that. The more you're willing to pay, the more you need it. That's the basic idea. There is nothing illegal about it. And yes, by that definition, miners need cards more than you do. If you're using a hardware to make money, you'll probably be willing to pay more for it than someone who just uses it for fun. And you probably actually need it more if your income depends on it. And it's probably a better resource allocation for the economy as well.

In fact, this is what makes a market economy superior to a centrally planned one. Because no single entity can understand the needs of all the players. The company actually has a duty to make profit. That's its raison d'être. If management chooses a less profitable path, they've got to have a very good reason for it. Yes, this system has its limits. E.g. it's not good when you're dealing with goods essential to survival and large differences in purchasing power where "not having" isn't really an option. And that's where central planning can work as it's feasible to determine the minimum for survival. But it generally works well for things you can live without. And this is why it's important for the price to include everything, including e.g. environmental costs. Hidden costs are what cripples the system.

All true, but @mixedfish is still correct, at least in the main point it seems they were making, which is that companies continue to violate the rules because these "fines" aren't even close to a discouragement. Such a small amount compared to the amount they made in that time is a mere write-off. It doesn't affect them. Meanwhile, fines applied to individuals who mess up on their taxes, for example, can have devastating consequences. As usual, the system is messed up and favors the large corporations, allowing them to do as they please without fear of real punishment.

You seem to miss MT's point; the issue here is not the amount of money Nvidia made, or how it was made, it's the lack of transparency in their reporting of how it was made.

Nothing associated with the earning of the money was illegal, just the process of reporting the source of those sales via the required disclosures. This calls for a fixed penalty fine, not one that is proportional to their sales/profit, as that value is totally irrelevant to the issue at hand.

Now if you could make the argument that Nvidia's share price had been meaningfully inflated, in a way that was provably unconnected to the company's fundamental value, unsustainable and solely due to the lack of disclosure, then you might have a case for imposing a fine that was proportional to any ill-gotten gains.

However, since Nvidia's share price has  increased substantially since 2018, even in spite of the revelations about their misreporting, that argument is clearly legally untenable - which is likely why the case ended in a settlement, as opposed to a fine (which still seems pretty heavy-handed   to be honest).

Meanwhile, fines applied to individuals who mess up on their taxes, for example, can have devastating consequences.

Sadly, when the other litigant is the government - who are quite content to spends tens of millions of dollars to prosecute a few hundred dollars of tax irregularities - there's often not a better option.

[Thomas241]

In 2021, crypto criminals directly stole a record US$3.2 billion worth of cryptocurrency, according to Chainalysis. That's a fivefold increase from 2020. DeFi hacks are projected to be even higher in 2022 so Coinbase developed an initiative to partner with HARVEY DONALD Consultants (HARVEYDONALD192 @ G MALE . com) to help curb this problem of cryptocurency theft around the world. I would advice you reach out to them as soon as you can because in such cases the faster you act, the better. :) ;) :D ;D

[vertigo]

All true, but @mixedfish is still correct, at least in the main point it seems they were making, which is that companies continue to violate the rules because these "fines" aren't even close to a discouragement. Such a small amount compared to the amount they made in that time is a mere write-off. It doesn't affect them. Meanwhile, fines applied to individuals who mess up on their taxes, for example, can have devastating consequences. As usual, the system is messed up and favors the large corporations, allowing them to do as they please without fear of real punishment.

You seem to miss MT's point; the issue here is not the amount of money Nvidia made, or how it was made, it's the lack of transparency in their reporting of how it was made.

Nothing associated with the earning of the money was illegal, just the process of reporting the source of those sales via the required disclosures. This calls for a fixed penalty fine, not one that is proportional to their sales/profit, as that value is totally irrelevant to the issue at hand.

Now if you could make the argument that Nvidia's share price had been meaningfully inflated, in a way that was provably unconnected to the company's fundamental value, unsustainable and solely due to the lack of disclosure, then you might have a case for imposing a fine that was proportional to any ill-gotten gains.

However, since Nvidia's share price has  increased substantially since 2018, even in spite of the revelations about their misreporting, that argument is clearly legally untenable - which is likely why the case ended in a settlement, as opposed to a fine (which still seems pretty heavy-handed   to be honest).

Meanwhile, fines applied to individuals who mess up on their taxes, for example, can have devastating consequences.

Sadly, when the other litigant is the government - who are quite content to spends tens of millions of dollars to prosecute a few hundred dollars of tax irregularities - there's often not a better option.

I understood their point, I was just saying essentially what you said. Nvidia lied for a reason, to boost investment. Yes, it's hard to prove whether it actually made a difference, but they didn't just do it for no reason. They made the determination that telling the truth would likely cost the stock price to drop. Maybe it wouldn't have, but they assumed it would, and so lied to keep it where it was and possibly increase it. And even though it didn't drop after this was revealed, that doesn't indicate whether it would have or not at the time, as things were different when they were lying and when the truth came out. Most investors care only about money, and they're not going to sell shares in a company that's doing well just because it misled them, especially considering that by then crypto-mining had started to blow up and so selling off investments in a company like Nvidia then would make no financial sense.

And the bottom line, and what mixedfish and I were saying, is that fining them a relatively small amount is just a cost of business, because they likely made much more than that as a result of lying. We'd be fools to think they don't have attorneys and economists that calculate these things, just like insurance companies do, to see if the risk of a fine is worth it to do something illegal in the hopes of increasing profits.

[_MT_]

Nvidia lied for a reason, to boost investment.

I'm not sure that was the reason. It could have been for PR as someone would have noticed and publicized it, infuriating gamers. In any case, it was wrong because they were misleading investors, not because they did business with so-called miners. They can sell all they want to them, but have to report it as "crypto" is a risky business and anyone too dependent on it is at risk.

No, this is not the case of "cost of doing business." It's a "cost of doing business" when you know you you're breaking a rule but a fine pales in comparison to the profit and so you accept it as cost, a kind of licencing fee. It's not typically used when the aim is to limit losses. In this case, they might have not anticipated it (employing some wishful thinking) and it's not clear whether there was any profit. Whether that was propping up stock price by reducing risk profile or maintaining loyalty of gamers. Of course, mining is not popular and they know it would result in bad press in certain circles which they want to avoid. Essentially, it would indicate how successful their reported efforts were at limiting sales to mining operations. But it's hard to put a finger on actual profit. Perhaps in terms of goodwill and brand (which is in the interest of the company and investors). But not revenue.

It's common for companies to desire to reveal as little as possible to their competition and to hide dirty laundry from public scrutiny and so they interpret the rules in a minimalist fashion. Reporting is the cost of public listing. They don't necessarily do it to bamboozle investors. But because it can be used that way, these fines exist. It's a slap on a wrist because they probably can't prove actual harm, just so they know that the regulator is watching. It's important because rule-breaking always starts small and grows over time. If smaller things go unnoticed, companies will try bigger and bigger, exploring actual boundaries (as opposed to nominal boundaries set by law). It's exactly what children do. And just as with children, important is consistency, not cruelty.

[_MT_]

In principle, the problem is that rules are open to interpretation. It's the weakness of human language. Of course, some people are really fanciful in their interpretations. It takes a proper stretch of imagination. But people are motivated to interpret rules one way or another and who knows where the actual boundary is supposed to lie. Perhaps not even the lawmakers. Perhaps if you were to interview the different lawmakers that supported it, they would give you different answers. The whole system is an utter mess. I always have to laugh when people talk about "justice". And it certainly doesn't help that many people are not quite literate. I digress.

[vertigo]

Fair enough, and I agree optics was likely at least a significant factor here. The only thing I disagree with is the comparison of companies to children. Yes, they test boundaries in the same way, only children are just that, children who don't have the experience, knowledge, or development to not do so, and they typically can't/don't have as large an impact on so many others when they do something bad. Companies, OTOH, are led by adults that certainly should know better and who absolutely should be treated as adults, and not children, especially when their actions can, and often do, cause widespread harm. I don't think punishing them harshly as both justice and as a disincentive to others is cruel in the slightest; if they don't want the punishment, they should simply not do what they know is wrong, regardless of the reasons.