- Bankless podcaster David Hoffman said on Friday that multiple crypto companies, including Lido, have received Wells Notices in the past months.
- Lido denied having received a Wells Notice.
- LDO dumped almost 20% once the rumor started spreading but failed to recover after it turned out to be false.
The Ethereum ecosystem was perplexed on Friday after a rumor started spreading on Twitter that the decentralized finance (DeFi) ecosystem might experience a shock in the near future.
David Hoffman, a podcaster at Bankless, said in one of the podcasts on Friday that multiple DeFi companies have received Wells Notices.
A Well Notice is a formal document informing the recipient that the Securities and Exchange Commission (SEC) is about to bring enforcement actions against the recipient.
“Many Wells Notices have been issued to many of the DeFi apps. Wells Notices have got shot out across the industry in the last week. It has not come to light yet.”
Hoffman then added that one of the DeFi platforms that received a Wells Notice was Lido, the largest decentralized staking services provider.
However, Lido came out and denied the rumors. Shortly after Hoffman himself backtracked on his statement and apologized for spreading the rumor.
However, Hoffman still said that his source informed him that there have been multiple Wells Notices delivered to crypto companies in the past months. At least one Wells Notice has gone out to a company “recently, that isn’t known to the public.”
Even if Lido receiving a Wells Notice is false, the staking provider’s native token LDO plunged on the rumor and has yet to recover.
LDO Dumps 15%
Holders of Lido’s governance token LDO weren’t particularly happy about the Wells Notice rumor.
LDO went from around $3 to as low as $2.46 when the rumor started spreading, an 18% drawdown, according to data from CoinGecko. LDO has so far failed to recover significantly and is trading at $2.60.
On-chain data shows that one of the most prominent sellers of LDO tokens in the past few days has been MakerDAO co-founder Rune. According to Lookonchain, Rune has been selling LDO since February 26 and buying MKR, MakerDAO’s native governance token.
Another identifiable seller is Wintermute, one of the largest crypto market makers. According to Andrew Thurman, it has sold around 2 million LDO, or 10%, of its LDO holdings.
Lido continues to be the largest DeFi platform in the market. The liquid staking protocol currently has around $9.12 billion in total value locked (TVL), according to data from DefiLlama.
On the Flipside
- Lido DAO is a decentralized entity lacking clear leadership. It’s unclear how to whom the SEC would serve a Wells Notice. However, the SEC already has an eye on staking services, since a few weeks ago the SEC ordered Kraken to discontinue its staking business.
- It’s unclear what other DeFi companies Hoffman is referring to.
Why You Should Care
Lido is one of the most important protocols in the Ethereum ecosystem, allowing better access to Ethereum staking. If the U.S. regulators manage to shut down any of DeFi protocols, including Lido, that would set a precedent for further crackdown on crypto-powered decentralized finance.
Read more about the SEC’s crackdown on crypto:
Kraken Pays $30 Million Fine and Shuts Down Staking Service in SEC Settlement, the Crypto Mom Reacts
Read more about Coinbase‘s latest acquisition:
Coinbase Acquires Crypto Asset Manager One River Digital in Bid to Spur Growth