Cathie Wood’s Ark Investment Management, the second-largest holder of Coinbase Global (COIN) stock, boosted its investment in the crypto exchange after the U.S. Securities and Exchange Commission sued the only publicly traded crypto exchange, causing a sharp fall in share prices.
The SEC filed a lawsuit against the crypto exchange Coinbase on June 6, alleging that the company operated an unregistered securities exchange, broker-dealer, and clearing house. In its filing, it argued that 13 different cryptocurrencies sold by Coinbase qualify as securities.
According to reports, ARK acquired 419,324 Coinbase shares, which, based on Tuesday’s closing price of $51.61, were worth approximately $21.6 million. The purchase was divided between ARK’s Innovation ETF (NYSE:ARKK), the Next Generation Internet ETF (NYSE:ARKW), and Fintech Innovation ETF (NYSE:ARKF).
Wednesday’s premarket trading data reveals that the company’s stock price rose by as much as 4.2%. The purchase, the first since May 3rd, brought Ark’s total Coinbase holdings to 11.44 million shares, valuing the position at approximately $590 million.
In July, Ark sold a portion of its Coinbase holdings, citing regulatory ambiguity following the SEC’s classification of certain tokens listed on the US exchange’s platform as securities. Even after Tuesday’s decline, Coinbase shares are up nearly 60% from their December record low.
The most prominent fund of Wood has gained 37% this year, compared to 33% for the Nasdaq 100 Index and 12% for the S&P 500. Last year, Ark Innovation ETF dropped 67%.
As of March 31st, Wood’s firm held more than 11.7 million Coinbase shares, or 6.3% of outstanding shares. Earlier this year, she reaffirmed her $1 million price target for Bitcoin, the largest crypto, which is presently trading for approximately $27,000.
Tuesday at the close of U.S. trading, Coinbase’s stock was down over 12 percent. COIN’s year-to-date growth is still over 50%.
Coinbase VS SEC – How will this play out?
Tuesday, the SEC alleged that Coinbase had violated its rules for years by allowing users to trade numerous crypto tokens that were in fact unregistered securities. The exchange proprietor responded that it is willing to pursue the legal dispute to the Supreme Court.
State regulators from California to New Jersey have demanded that Coinbase discontinue its so-called staking service, which rewards customers for allowing their tokens to be used to effectuate blockchain transactions. Monday, the SEC brought similar accusations against Binance Holdings Ltd.
The Chief Executive Officer of Coinbase, Brian Armstrong, has responded publicly to the United States Securities and Exchange Commission’s (SEC) lawsuit against his company, tweeting that the team is “confident in our facts and the law” and welcomes the opportunity to “finally get clarity around crypto rules” in court.
Armstrong claimed on Twitter that the lawsuit against Coinbase is “very different from others” because it is “exclusively focused on what constitutes or does not constitute a security.” This makes the group “confident in our facts and the law.” He claimed that the U.S. government cannot even concur on which cryptocurrencies are securities because “the SEC and CFTC [Commodity Futures Trading Commission] have made conflicting statements.”
Armstrong hoped that court proceedings would “finally” provide crypto exchanges with clarity on how to comply with securities laws. He also lauded recent attempts by Congress to enact crypto legislation, stating, “This is why the US Congress is introducing new legislation to fix the situation.”
Since March, Armstrong’s response is the most recent in a series of legal filings and public statements between the exchange and the SEC.