The U.S. Securities and Exchange Commission (SEC) is considering enforcement action against United States Oil Fund LP (USO), the largest crude oil exchange-traded fund, due to statements made after oil prices plunged into negative territory in April.

The United States Oil Fund LP was designed to mimic day-to-day fluctuations in current U.S. oil futures. In April, the oil market collapsed, with U.S. futures falling below negative-$40/bbl, USO lost 45% within a two-day span.

The notice, known as a Wells notice, says SEC staff have made a preliminary recommendation against USO, United States Commodity Fund LLC and its CEO, John Love, saying it may have violated securities laws related to misstatements or fraud, according to the filing.

The notice cites the fund's disclosures in late April and early May on the constraints imposed on its ability to invest in oil futures contracts. USO said in April it may not be able to meet its objective of reflecting the spot prices of oil, as it shifted funds out of near-term contracts in case oil futures slumped again.

The fund said in Wednesday's filing that their disclosures and their actions were appropriate and that they intend to contest the allegations.

Like other ETFs, USO sold out of May contracts and bought June and later-dated contracts further forward well before the meltdown on April 20. However, over the coming days and months, the ETF said it would move a significant portion of its portfolio into later-dated contracts.

On April 21, the fund said it had issued all of its registered shares and was thus suspending the creation of new shares. As a result of the suspension, there was a significant discrepancy between the fund's trading price and the performance of the oil futures it held.