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NVIDIA Demands Dismissal of “Misleading Crypto Mining Revenue” Lawsuit

Dec 7, 2019 | Cryptocurrency, News

{Fintoism Daily News) – The cryptocurrency mining industry has received a lot of attention in recent years. Hundreds of people bought new hardware during the 2017-2018 price craze, albeit all of this excitement has resulted in a major lawsuit for NVIDIA.

The Ethereum Mining Craze

Back in late 2017 and early 2018, the mining of cryptocurrencies such as Ethereum was immensely popular. People even went out of their way to buy multiple graphics cards to mine the cryptocurrency. This allowed companies such as AMD and NVIDIA to make a fair bit of money from extra hardware sales.

As is often the case with cryptocurrency mining, there are certain drawbacks. The value of a cryptocurrency fluctuates a fair bit. That also affects the overall profitability of mining different currencies over time. Additionally, one has to keep in mind the mining process utilizes a lot of electricity. Those costs need to be taken into account at all times. 

When factoring in the costs of buying multiple high-end graphics cards, it is evident that it will take a long time to recuperate the initial investment. Most people who jumped on the mining bandwagon in 2017 and 2018 were never able to achieve that goal. Second-hand GPUs can easily be sold on online marketplaces, but it is not necessarily the ideal solution either.

Skewing the Numbers (on Accident?)

When the sales of NVIDIA graphics cards started to dip again – due to massively declining Ethereum prices – the investors in the company decided to grow uneasy. In the company’s Q3 2018 earnings report, it became apparent the share price of NVIDIA was on the decline. Some investors took this as a validation of how the company misled them as far as the hardware demand for cryptocurrency mining is concerned. 

One crucial aspect of the story comes in the form of the Crypto SKU. It was a brand new processor developed by NVIDIA and dedicated to cryptocurrency mining. The sales figures of that model were not part of the company’s regular gaming-related income segment.

Despite launching this dedicated hardware, most miners kept purchasing regular cards destined for the gaming market. This skewed the overall perception of how NVIDIA was performing in these specific segments.  Unfortunately, this also caused some friction with the company’s investors.

In the mind of some investors, NVIDIA’s executives made them believe the higher gaming revenues had nothing to do with cryptocurrency mining. It took, according to the plaintiffs, until August 2018 for the executives to confirm the crypto-related revenue was also included in the gaming segment. Those figures do not include revenue generated by the Crypto SKU.

NVIDIA Gets Taken to Court

This growing dismay among investors has ultimately culminated in a lawsuit. Despite being filed in December of 2018, it is still ongoing twelve months later. Regarding the arguments by investors, the hardware manufacturer firmly believes analysts may have based their expectations on a flawed model. There is no such thing as a static demand for gaming hardware, regardless of cryptocurrency mining popularity. 

Furthermore, NVIDIA’s staff claims investors are simply “handpicking the statements that are in-line with their own mindset”. Every other bit of information is, according to NVIDIA, being ignored. The company has attempted to provide transparent information regarding its different revenue streams. 

What is remarkable is how the plaintiffs seemingly never disclosed any credible facts regarding their alleged financial losses. It is evident that this case could be dismissed fairly soon, yet the US legal system is known for throwing some curve balls now and then. 

This week, the hardware manufacturer inquired about having the case dismissed in its entirety. It is unclear if the judge presiding over this case will take that advice to heart.

The outcome of this lawsuit could also impact the cryptocurrency industry as a whole, either for better or worse. 

Images courtesy of their respective sources.

Fintoism is not providing financial or investment advice. All content published on this platform is for entertainment and educational purposes only.

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<a href="https://fintoism.com/author/oglock/" target="_self">JP Buntinx</a>

JP Buntinx

JP Buntinx is passionate about cryptocurrencies, fintech, blockchain, and finance. He currently resides in Belgium.
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