Nvidia Sued For Understating Billions in Crypto Revenue

Investors allege that the graphics processor company Nvidia is more dependent on crypto than they’re letting on.

Bitcoin GPU mining rig
The technologies created for gaming devices and cryptocurrency miners are very similar.

Investors in Nvidia have filed a lawsuit against the company for misrepresenting their revenue.

Better known as designers of Graphics Processing Units (GPUs) and computer processors for technologies, Nvidia, along with Advanced Micro Devices (AMD), saw a marked increase in their sales two years ago, thanks to a shift towards cryptocurrency mining.

Although their products were originally designed for game developers, the GPUs were found to be effective at solving complex mathematical problems; making them useful for cryptocurrency mining.

As the boom simmered down, both Nvidia and AMD experienced a simultaneous drop in shipments and a rise in inventories. The demand for their products was also slowing because of the decrease in cryptocurrency prices and mining profitability.

The stream of revenue that was obtained from catering to cryptocurrency miners, which both companies promise to classify under Original Equipment Manufacturer (OEM), was instead listed under ‘Gaming’.

The lawsuit states that Nvidia underreported the magnitude of its dependency on cryptocurrency sales to its investors.

It names several senior members of Nvidia management, such as Chief Executive, Jensen Huang, as its defendants, with the class lawsuit filed on behalf of all the company’s investors.

Furthermore, the legal challenge also names Nvidia Chief Financial Officer, Collette Kress, and Executive Vice President, Jeff Fisher, as persons directly responsible for the understatement in revenue.

Employees who were based in China and Russia were crucial in assessing whether the company really was misleading investors. This is because most cryptocurrency mining operations are located in these countries due to low energy costs.

The complainants state that Nvidia misled investors because of the following claims made by management:

  • The revenue earned selling cryptocurrency mining products was not significant in comparison to the company’s total revenue during the time period that is covered by the lawsuit.
  • The boost in gaming revenue Nvidia experienced during the crypto boom was from sales made to gamers, not to miners
  • The revenue from mining products was only reflected in the OEM segment; however, two-thirds of the mining revenue was classified in the Gaming segment, according to the lawsuit.

Beyond these transgressions, the complainants also allege that Nvidia’s management was not only fully aware of what was happening, but they also continued to target cryptocurrency miners after experiencing the rise in demand.

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