Cathie Wood-led ARK Investment Management bought a whopping stake in Coinbase Global Inc (NASDAQ:COIN) on Tuesday – a day when the stock tanked over 12% in the aftermath of the Securities and Exchange Commission (SEC) suing the company in a federal court.

Funds operated by ARK bought over 419,000 shares at an estimated valuation of over $21.6 million based on Tuesday's closing price. The purchase was done via the ARK Innovation ETF (NYSE:ARKK), the ARK Next Generation Internet ETF (NYSE:ARKW) and the Ark Fintech Innovation ETF (NYSE:ARKF).

According to the SEC's complaint, since at least 2019, Coinbase has made billions of dollars "unlawfully" facilitating the buying and selling of crypto asset securities and it intertwines the traditional services of an exchange, broker, and clearing agency without having registered any of those functions with the regulator.

"We allege that Coinbase, despite being subject to the securities laws, commingled and unlawfully offered exchange, broker-dealer, and clearinghouse functions," said SEC Chair Gary Gensler.

Response: Coinbase CEO Brian Armstrong said in his tweet that instead of publishing a clear rule book, the SEC has taken a regulation-by-enforcement approach that is harming America. "So if we need to avail ourselves of the courts to get clarity, so be it," he said.

"Btw, in case it's not obvious, the Coinbase suit is very different from others out there – the complaint filed against us is exclusively focused on what is or is not a security. And we are confident in our facts and the law," he added.