Cathie Wood's funds bought the dip in Gingko Bioworks after a short-seller called it a 'Frankenstein' of frauds

• Cathie Wood's Ark Invest bought the dip in Ginkgo Bioworks after the stock tumbled as much as 24%.
• Scorpion Capital slammed Ginkgo's business model, alleging it was a "Frankenstein mash-up of frauds."
• Ark's Innovation ETF and Genomic Revolution ETF now hold a combined $363 million of Ginkgo.

Cathie Wood's funds snapped up more than 8 million shares in Ginkgo Bioworks on Wednesday, as the stock plunged as much as 24% in the wake of a report that called it a "Frankenstein mash-up of the worst frauds."

The flagship Ark Innovation ETF bought 6.7 million shares in the synthetic biology company, while the Genomic Revolution ETF picked up 1.5 million. Together, the ETFs now have a combined $363 million of Ginkgo, according to an Ark Invest trading notification, meaning the holding rose 11% in one day.

Wood took advantage of a slide in Ginkgo's stock after Scorpion Capital released its short-seller report. The stock fell 11.6% to reach $10.59 per share at Wednesday's close, having touched an intraday low of $9.27. It is down another 2.5% to $10.32 in premarket trading Thursday, and has lost 13% so far this year.

Scorpion Capital, which is short Ginkgo, bashed the company's business model and practices. It said it based its findings on 21 research interviews with former employees, executives, and people currently employed at partner companies. Gingko went public last month via a $1.6 billion deal with a special purpose acquisition company.

"Ginkgo is a house of cards - in our opinion, one of the most brazen frauds of the last 20 years," it said in the report published Wednesday.

It alleged that Gingko's revenue is an "elaborate fiction" and that its current income is based on a "dubious shell game" based on customers the company itself fabricated and invested in. That meant Ginkgo sent its own money on a round-trip journey on its balance sheet, Scorpion Capital claims.

"Our focus at Ginkgo is increasing the scale of our platform so we can deliver more cell programs to customers," Gingko's CEO and co-founder Jason Kelly told Insider in a statement on Thursday.

One thing the report criticizes is that new startups are launching programs on Ginkgo's platform and leveraging its platform to secure capital, get resources, and launch their new company quickly, he added. "We don't think that is a problem - starting a biotech company should be as easy as launching a website!"

Ark's decision to dive further into Ginkgo may not be surprising, considering its prior investment activity. In August, its holdings in Zymergen, a synthetic biology rival to Ginkgo, saw the stock price tumble 80% in one day. But Ark tripled its stake in the company, instead of retreating.

The trading update from Ark Invest also showed Wood continues to dump its stake in Tesla. The Innovation ETF sold 63,135 shares in the electric-car maker on Wednesday, following a string of similar sales by the fund. But Tesla still represents its biggest holding.

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