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Lido’s LDO token tanked 10% on Saturday following a rumor the U.S. Securities and Exchange Commission (SEC) served the largest Ethereum staking service with a Wells Notice.

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

A Wells Notice is a letter from the SEC detailing charges it is considering bringing against a recipient. On Friday, David Hoffman of the "Bankless" crypto podcast said that he’d heard Lido and other crypto projects had been served with Wells Notices, an assertion he later retracted.

Hoffman described his comments to CoinDesk as "a miscommunication between me and a lawyer friend."

The rumor sparked panic on Crypto Twitter, however, and it quickly spread across the Colorado convention hall where ETHDenver, one of the year’s largest crypto industry gatherings, was underway. The rumors, if proven true, would suggest that the SEC is ramping up scrutiny of Ethereum and crypto staking.

Wells Notice rumors

On Friday, Hoffman said on a video stream that “many Wells Notices” had been distributed in the past week, adding, “I think Lido got one.” Soon after the video spread on Twitter, Hoffman backtracked. “While there is at least one confirmed Wells Notice that *has* gone out recently, that *isn't* known to the public, the idea of a mass recent carpet bomb isn't correct,” he tweeted.

“There have apparently been rumors of Lido being caught in the crosshairs of Gary the Destroyer,” he said, referencing SEC Commissioner Gary Gensler, who has become persona non grata in some cryptocurrency circles due to the perception that he is unfriendly to the industry. “Members of the Lido team have reached out to me and said that this is false.”

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

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

Andrew Thurman of crypto analytics firm Nansen tweeted that Wintermute, one of the largest crypto market makers, sold off around 10%, or $2 million, of its LDO holdings. Thurman speculated the sell-off was correlated with the Wells rumor, but Wintermute CEO Evgeny Gaevoy told CoinDesk that the timing was "coincidental."

The SEC’s crypto crackdown

Friday’s Wells Notice fracas comes amid a broader crypto industry crackdown by U.S. securities regulators. Last month, for instance, stablecoin issuer Paxos confirmed that it had been served with a Wells Notice on Feb. 3. The SEC said it is considering charging Paxos with operating an unregistered security with its Binance-linked BUSD stablecoin.