Lido’s LDO Token Drops 10% After Rumored Crypto Staking Service Receives SEC Notice

Lido’s LDO token fell 10% on Saturday following a rumor that the US Securities and Exchange Commission (SEC) served the largest Ethereum stake service with a Wells Notice.

A spokesperson for Lido declined to comment on whether the protocol had received a notice.

A Wells Notice is a letter from the SEC that describes charges it is considering bringing against a receiver. On Friday, David Hoffman of the Bankless crypto podcast said he had heard that Lido and other crypto projects had been served with Wells Notices, a claim he later retracted.

However, the rumor sparked panic on crypto-Twitter, and it quickly spread across the Colorado convention hall where ETHDenver, one of the year’s biggest gatherings for the crypto industry, was underway. The rumors, if proven true, suggest that the SEC is increasing its scrutiny of Ethereum and crypto efforts.

On Friday, Hoffman said on a video stream that “a lot of Wells messages” had been distributed in the past week, adding that “I think Lido got one.” Soon after the video spread on Twitter, Hoffman withdrew. “While there is at least one confirmed Wells Notice that *has* expired recently that is *not* known to the public, the idea of ​​a recent mass blanket bomb is not correct,” he tweeted.

“Apparently there have been rumors that Lido was caught in the crosshairs of Gary the Destroyer,” he said, referring to SEC Commissioner Gary Gensler, who has become persona-non-grata in some cryptocurrency circles because of the perception that he is unfriendly to industry. “Members of the Lido team have contacted me and said this is untrue.”

It is unclear how the SEC would have delivered notice to Lido. The stake service is technically run by the Lido DAO (decentralized autonomous organization), meaning it is governed by a large network of Lido’s LDO token holders and lacks a formal leadership structure.

Despite Hoffman’s withdrawal, the market appeared to respond to his Wells remarks; the price of LDO has fallen 10% in the last 24 hours.

Andrew Thurman of crypto analytics firm Nansen tweeted that Wintermute, one of the largest crypto market makers, sold about 10%, or $2 million, of its LDO holdings. Thurman speculated that the sales were correlated with the Wells rumor.

Friday’s Wells Notice fracas comes amid a broader crackdown on the crypto industry by US securities regulators. Last month, for example, stablecoin issuer Paxos confirmed that it had received a Wells notice on February 3. The SEC said it is considering charging Paxos for operating an unregistered security with its Binance-affiliated BUSD stablecoin.

Lido, a floating staking platform, helps users unlock – or “stake” – tokens to earn interest and help secure the Ethereum blockchain. Lido currently accounts for 31% of all staked ether (ETH), according to Dune Analytics. The $8 billion staked with Ethereum via Lido, a decentralized service, makes it the largest Ethereum player.

Last month, crypto exchange platform Kraken agreed to shut down its own betting service in a settlement with the SEC. The Kraken shutdown had a chilling effect on the crypto-staking landscape, raising regulatory questions for similar services – centrally controlled and DAO-operated alike.