PayPal Holdings Inc. said federal regulators are investigating the company's Venmo free peer-to-peer payment service in connection with potential unfair trade practices.

PayPal received a civil investigative demand on March 28 from the Federal Trade Commission for documents related to Venmo, the company said Thursday in a regulatory filing. The FTC probe focuses on whether the electronic payments company, through Venmo, engaged in unfair or deceptive trade practices.

The investigation "may result in substantial costs, including legal fees, fines, penalties and remediation expenses and actions and require us to change aspects of the manner in which we operate Venmo," the company said in the filing.

PayPal on Wednesday said it added 4.5 million new customer accounts in the first quarter while reporting profit and sales that topped analysts' estimates.

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