Cathie Wood explains ARK Invest’s sale of Coinbase stock

Regulatory uncertainty prompted ARK Invest to cut the amount of Coinbase stock acquired by its funds. Cathie Wood, the CEO of the asset-management firm, said so in an interview with Bloomberg.

She characterised the investigation by the SEC into Coinbase’s activities. The agency alleged the platform allowed U.S. residents access to trading digital assets that could be deemed securities.

Five days earlier the Commission filed a lawsuit against former Coinbase product manager Ishan Wahi and his associates, accusing them of fraud related to investment contracts. The SEC had classified 9 of the 25 cryptocurrencies implicated in their operations as securities.

Subsequently Coinbase confirmed receiving inquiries from the regulator about operations, products and listings.

On July 26, ARK Invest sold a total of 1.41 million Coinbase shares for about $75 million. On that day the platform’s market capitalization fell 21.1%, before subsequently rising 80%. The firm, through its funds, still holds about 7.1 million Coinbase shares.

According to Wood, ARK Invest found it difficult to estimate how many Coinbase assets would have to be delisted if they were not registered with the SEC, or how the exchange’s business model would change if the platform chose to pursue that step.

She stressed that the insider-trading allegations against Coinbase employees did not prompt selling the shares.

Wood expressed confidence in a near-term reversal in Federal Reserve policy as the U.S. economy enters a recession. She reaffirmed a commitment to a strategy of buying innovative companies, as they “will thrive in difficult times”.

Earlier, S&P Global cut Coinbase’s corporate rating from “BB+” to “BB”, while keeping the outlook negative.

Two class-action lawsuits were filed against the exchange. According to documents, Coinbase offered investors cryptocurrency assets that should have been registered as securities.

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