ARK Invest, the renowned investment management firm founded by Cathie Wood, continues to demonstrate its confidence in cryptocurrency exchange Coinbase by purchasing an additional 168,869 shares worth around $8.5 million on May 1st. This acquisition comes as Coinbase's stock experiences a decline amid an ongoing legal battle with the United States Securities and Exchange Commission (SEC) and a new class-action lawsuit alleging insider trading.
Coinbase shares have dropped more than 20% over the past month, from nearly $72 in April to $50.1 on May 1st. The SEC sent Coinbase a Wells notice in March, suggesting enforcement action against the exchange. In response, Coinbase filed a motion against the SEC on April 25, asking the regulator to answer 50 questions regarding the regulatory treatment of certain digital assets.
In addition to the SEC lawsuit, Coinbase faces a class-action lawsuit filed in a Delaware state court by investor Adam Grabski on behalf of all shareholders. The suit alleges that Coinbase executives, including CEO Brian Armstrong and famed investors Marc Andreessen and Fred Wilson, failed to disclose negative information about the company prior to listing its shares in April 2021. As a result, Coinbase insiders allegedly made themselves richer by $1.09 billion by selling shares before the negative news became public.
The lawsuit also highlights Coinbase's decision to pursue a direct listing of its existing shares rather than a more traditional initial public offering (IPO), which would have required new shares and a lockup period for insiders. The direct listing allowed executives and investors to sell pre-existing shares, directly benefiting from the stock sales.
Despite these legal challenges, ARK Invest remains bullish on Coinbase, with the recent purchase accounting for nearly 50% of the total Coinbase shares acquired by ARK last month. In April, the investment firm bought a total of 304,300 shares worth $17.5 million, and previously, it purchased 2.4 million shares in March for about $117 million.
As the crypto market continues to evolve, investors will be closely monitoring both the SEC's actions and the outcome of the class-action lawsuit against Coinbase.