Cryptocurrency ─ The biggest crypto exchange in the US in terms of total trade volume, Coinbase is currently facing a probe by the US Securities and Exchange Commission (SEC). The commission is investigating whether the company “improperly allowed” investors in the US to trade its digital assets that should have been classified and registered as securities. In total, the commission is looking into more than 150 tokens being offered by the exchange and if these must be reclassified and listed as securities, thus falling into SEC’s supervision.

Coinbase’s Response and Explanation

This is not the first time the crypto exchange has been in the limelight of a legal controversy. Just last week, Ishan Wahi, a former Coinbase Product Manager, was charged by US Federal Prosecutors with insider trading. It was found out that Wahi has been tipping off his brother and a close friend about the company’s upcoming altcoin listings. Wahi’s legal prosecution is the first-ever insider trading charge related to cryptocurrency.

After the probe report broke out, the company lashed out on its website, saying: “We understand that the SEC has separately filed securities fraud charges related to this wrongdoing today. The DOJ did not charge securities fraud. No assets listed on our platform are securities, and the SEC charges are an unfortunate distraction from today’s appropriate law enforcement action.”

“Crypto assets that are securities need an updated rulebook to help guide safe and efficient practices. Crypto assets that are not securities need the certainty of being outside those rules.” The company added.

Meanwhile, in a shift of tone, Coinbase’s Chief Legal Officer, Paul Grewal, tweeted, “I’m happy to say it again and again: we are confident that our rigorous diligence process—a process the SEC has already reviewed — keeps securities off our platform, and we look forward to engaging with the SEC on the matter.” Essentially reassuring the company’s stakeholders, especially its clients and investors.

On the other hand, the Director of the SEC’s Division of Enforcement, Gurbir Grewal, explained the position of the commission on the matter while at the same time citing the insider trading charge, saying: “In this [Coinbase fraud] case, those realities affirm that a number of the crypto assets at issue were securities, and, as alleged, the defendants engaged in typical insider trading ahead of their listing on Coinbase.”

Cathie Wood’s Funds Dumped its Coinbase Holdings

Shortly after the disclosure, on Tuesday, the renowned Tech Investor sold a total of 1.41 million shares (valued at $75 Million) of Coinbase Global, Inc. (COIN) across the three different funds being managed by Wood. Her flagship fund, the Ark Innovation ETF (ARKK), sold the highest quantity at 1.13 million total shares, while the remaining 270,000 shares are split between the remaining two funds, the Ark Fintech Innovation ETF and ARK Next Generation Internet ETF.

COIN plunged by more than 21% on Tuesday following the report that SEC is investigating the company as well as Wood’s massive liquidation in the company. Nevertheless, Wood’s managed funds cumulatively represent Coinbase’s third largest shareholder and still has an approximately outstanding holding of 7.54 million shares in the company, a drop of about 15% from Wood’s original position of 8.85 million shares in the company prior to the probe.