No Gaming the System – The SEC’s Interest in Enforcing Pure Disclosure Violations Continues

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On May 6, 2022, the Securities and Exchange Commission (“SEC”) announced a $5.5 million settlement of charges against NVIDIA Corporation (“NVIDIA”) for allegedly failing to adequately disclose in the Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section of its Forms 10-Q the fact that cryptomining was a significant factor in the year-over-year growth in its more traditional gaming business.

The SEC alleged that NVIDIA’s inadequate disclosures violated Sections 17(a)(2) and (3) of the Securities Act of 1933 (the “Securities Act”) and Section 13(a) of the Exchange Act of 1934 (the “Exchange Act”) and Rules 13a-13 and 13a-15(a) thereunder. Notably, the SEC did not allege that there was any misconduct that hadn’t been disclosed or that there was anything inherently wrong with NVIDIA capitalizing on the growth of the cryptomining business. Instead, the violations focus on the fact that the importance of crypto-related sales to its gaming business was not disclosed to investors, and therefore investors were not able to adequately evaluate the risks that it posed to the business.

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