Lido’s LDO token fell 10% on Saturday due to a rumor that the U.S.A Wells Notice was delivered by the Securities and Exchange Commission (SEC) to the biggest Ethereum staking service.

Regarding whether the protocol had been notified, a Lido spokesperson opted not to comment.

A Wells Notice is a letter from the SEC outlining the charges it is considering pressing against the recipient. On Friday, David Hoffman of the Bankless cryptocurrency podcast claimed to have heard that Lido and other crypto projects had received Wells Notices, a claim he later withdrew.

Hoffman told CoinDesk that he and a lawyer friend had “miscommunicated” when he made his remarks. “.

The Rumors

However, the rumor quickly spread throughout the Colorado convention center where ETHDenver, one of the biggest gatherings of the year in the crypto industry, was taking place. If the words are accurate, it would indicate that the SEC is closely monitoring Ethereum and crypto staking.

On Friday, Hoffman stated on a live video that “many Wells notices” had been distributed over the previous week. He added, “I think Lido got one. Hoffman changed his mind soon after the video gained popularity on Twitter. The notion of a widespread recent carpet bomb is incorrect, he tweeted, “although there is one confirmed Wells Notice that isn’t known to people.

He referred to SEC Commissioner Gary Gensler, who has the nickname “Gary the Destroyer” in some crypto circles due to the perception that he is hostile to the sector, saying there have been rumors that Lido was in his crosshairs. “Lido team members have contacted me and informed me that this is untrue. “.

Notifying Lido’s LDO

It is still being determined how the SEC would have notified Lido. The staking service is run by the Lido DAO, which means that it is overseen by people who own LDO tokens from Lido and does not have a formal structure of command.
The price of LDO dropped 10% over the last day.

Approximately 10%, or $2 million, of Wintermute’s LDO holdings, were sold off, according to a tweet by Andrew Thurman. Wintermute is one of the biggest crypto market makers. Thurman speculated that the sell-off was correlated with the Wells rumor, but Wintermute CEO Evgeny Gaevoy told CoinDesk that the timing was “coincidental. “.

Crackdown on Crypto by the SEC.

The Wells Notice controversy on Friday coincides with a broader U.S. crackdown on the cryptocurrency industry. S. securities regulatory authorities. For instance, stablecoin issuer Paxos acknowledged last month that it had received a Wells Notice on February 1. 3. According to the SEC, Paxos’ operation of its Binance-linked BUSD stablecoin amounted to operating unregistered security.

Users can “stake” or lock up tokens on Lido to earn and contribute to the security of the Ethereum Network. According to Dune Analytics, Lido currently represents 31% of all ETH that has been staked. Lido, a decentralized service, is an enormous Ethereum stakeholder thanks to its $8 billion stake.

Conclusion

In a settlement with the SEC last month, the cryptocurrency exchange platform Kraken agreed to shut down its staking service. The Kraken shutdown had a bad effect on the crypto staking market and raised regulatory concerns for comparable services, both DAO-operated and centralized.