Lido Finance’s LDO Token Declines Amid SEC Rumors

David Hoffman, a notable crypto influencer, has sparked rumors that the SEC issued a Wells Notice to the decentralized staking solution, Lido Finance.

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Lido Finance’s LDO token has been on a downward trajectory following speculation about a potential Wells Notice from the U.S. Securities and Exchange Commission (SEC).

"In the past week… Wells notices have been distributed everywhere" ~ @TrustlessState discussing inside rumors re: DeFi protocols pic.twitter.com/zDd2YYCEvQ
— Mike Dudas (@mdudas) March 3, 2023

The speculation began with David Hoffman, host of the popular crypto podcast “Bankless,” who revealed on his livestream on March 4 that he had heard Lido and several other crypto projects had received Wells Notices from the SEC. However, Hoffman quickly retracted his claim, explaining to CoinDesk that it was a “miscommunication between me and a lawyer friend.”

A Wells Notice is a communication from the SEC to businesses about to be sued, detailing the allegations the agency intends to enforce. However, a Wells Notice is not the final step in the SEC's process. According to Investopedia, defendants typically have 30 days to respond with a legal brief called a Wells Submission, which argues against the allegations.

Despite Hoffman’s retraction, the rumor created panic within the Twitter crypto community and rapidly spread through the halls of Colorado, where ETHDenver 2023—a major crypto event in the U.S.—is currently taking place. If true, this would signal the SEC’s increased scrutiny of both Ethereum and crypto staking services.

Additionally, Andrew Thurman from Nansen tweeted that Wintermute, one of the largest crypto market makers, sold 10% (worth $2 million) of its LDO holdings. Thurman suggested that this sell-off might have been triggered by the rumors, although Wintermute CEO Evgeny Gaevoy assured CoinDesk that it was merely a “coincidence.”

Despite Hoffman’s clarification, the market remains negative, with LDO’s price closing in red for the past two days and currently trading around $2.545.

LDO/USDT 1-hour Chart on Binance as of 10:25 AM, March 6, 2023

With $8 billion in ETH staked on its platform (approximately 31% market share), Lido Finance is the largest liquid staking solution in the crypto sector. Lido allows ETH holders to earn rewards through staking while receiving stETH tokens, which can be used in other DeFi applications.

This is just one instance in the SEC’s recent crackdown on the crypto industry. Last month, Paxos received a Wells Notice from the SEC on February 3, with the agency accusing Paxos of violating investor protection laws and operating an unregistered security—specifically, the BUSD stablecoin linked to Binance. Additionally, the SEC recently forced Kraken to shut down its staking service permanently.