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After rumors that Crypto Staking Service received SEC notice, Lido’s LDO Token drops 10%

After a rumour that the U.S. Securities and Exchange Commission (SEC) served the largest Ethereum staking service with a Wells Notice, Lido’s LDO token fell 10% on Saturday.

If the protocol had received a notice, a Lido representative would not comment.

An SEC Wells Notice is a letter outlining the accusations the agency is thinking about pressing against the receiver. David Hoffman of the Bankless cryptocurrency podcast said on Friday that he had heard Lido and other crypto ventures have received Wells Notices, a claim he later withdrew.

Hoffman said that his remarks to CoinDesk were the result of “a misunderstanding between me and a lawyer friend.”

But, the report prompted fear on cryptocurrency Twitter and swiftly travelled across the Colorado convention centre where ETHDenver, one of the biggest gatherings of the year’s crypto industry, was taking place. If the claims are accurate, it would indicate that the SEC is increasing its investigation into Ethereum and cryptocurrency staking.

Hoffman stated on camera on Friday that “several Wells notices” had been handed out over the previous week, and that “I guess Lido got one.” Hoffman changed his mind shortly after the video went viral on Twitter. The idea of a huge recent carpet bomb is incorrect, he tweeted, “but there is at least one confirmed Wells Notice that *has* gone out* that *isn’t* known to the public.

He referred to SEC Commissioner Gary Gensler, who has earned the nickname “Gary the Destroyer” in some cryptocurrency circles due to the assumption that he is hostile to the sector, saying that there had allegedly been whispers that Lido was in his crosshairs. “Lido team members have contacted me and stated that this is untrue,”

How the SEC would have notified Lido is a mystery. Technically speaking, the staking service is run by the Lido DAO (decentralised autonomous organisation), which means that it is overseen by a broad network of people who own Lido’s LDO tokens rather than having a formal hierarchy.

The market seems to react to Hoffman’s Wells comments despite his retractions; the price of LDO has dropped 10% over the last day.

One of the biggest cryptocurrency market makers, Wintermute, sold off almost 10%, or $2 million, of its LDO holdings, according to a tweet by Andrew Thurman of the crypto analytics company Nansen. Evgeny Gaevoy, CEO of Wintermute, told CoinDesk that the timing was “coincidental,” contrary to Thurman’s speculation that the sell-off was tied to the Wells report.

Users can “stake” or lock up tokens on Lido’s liquid staking platform to earn interest and contribute to the security of the Ethereum blockchain. According to Dune Analytics, 31% of all staked ether (ETH) is now held by Lido. The greatest Ethereum staker is Lido, a decentralised service, with $8 billion staked in the cryptocurrency.

In a deal with the SEC last month, the cryptocurrency exchange platform Kraken agreed to close its own staking service. The Kraken shutdown had a chilling impact on the cryptocurrency staking market and raised regulatory concerns for comparable services, both DAO-operated and centralised.

Patrick Huston
Patrick Huston
As a senior editor, Patrick is a professional who is in charge of putting out business news. As a senior editor, Patrick is likely to be in charge of the duties of junior editors and writers, make sure the content is correct and high-quality, and work with other departments to make sure the business news is published on time. Patrick knows a lot about business and the latest market trends. He uses this knowledge to choose and edit stories that are both interesting and useful to readers. He also works with reporters and analysts to come up with insightful pieces that help readers keep up with the latest business news. Patrick is a very important part of keeping the public informed and interested in important business issues. He is passionate about journalism and strives for excellence.

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