The founder of a now-defunct crypto lending platform has agreed to pay more than $10.5 million to resolve allegations from the U.S. Securities and Exchange Commission (SEC) that he misused investor funds to purchase millions in TerraUSD before the stablecoin’s collapse.
Huynh Tran Quang Duy, also known as Duy Huynh, allegedly told customers of his platform, MyConstant, that their investments would be used in a crypto-backed loan matching service promising a 10% return, according to an SEC order issued Tuesday.
Instead, the SEC claims Huynh diverted $11.9 million of customer funds to buy TerraUSD (UST), a stablecoin tied to the Terra blockchain that imploded in mid-2022, erasing billions in market value.
MyConstant was among several crypto businesses impacted by Terra’s downfall, which triggered an estimated $500 billion loss across the crypto market.
Regulators have been investigating MyConstant since late 2022, when California’s Department of Financial Protection and Innovation accused it of violating state securities laws and ordered it to shut down. This settlement marks the first time customers may receive restitution.
Huynh to Pay Millions in Restitution to MyConstant Investors
The SEC announced that Huynh, a dual citizen of Vietnam and the U.S., has agreed to repay over $8.3 million in disgorgement and $1.5 million in prejudgment interest to reimburse MyConstant customers.
In addition, he is required to pay a $750,000 civil penalty within 14 days. Huynh neither admitted nor denied the SEC’s findings.
MyConstant Lost Nearly $8 Million on TerraUSD Investment, SEC Says
The SEC stated that MyConstant, launched in 2018, promoted itself as a platform offering returns between 6% and 10% by pooling customer funds and lending them out, with crypto backing the investments.
The company marketed these offerings as “low risk,” and between September 2020 and November 2022, it raised over $20 million from more than 4,000 investors, according to the agency.
According to the SEC, Huynh used $11.9 million of investor funds to purchase TerraUSD and misappropriated approximately $415,000 for personal expenses. He ultimately lost over $7.9 million when TerraUSD’s value plummeted in May 2022.
The agency alleged that, despite the losses, Huynh tried to “falsely assure investors of the safety of their funds” and encouraged them to reinvest in MyConstant. He reportedly emailed investors summaries that included fictitious loans the platform had supposedly issued.
MyConstant shut down operations in mid-November 2022, attributing the decision to the broader collapse of multiple crypto firms that year. Since then, it has returned $1.8 million to investors and placed all remaining assets in a trust for their benefit.
Terra Promised High Yields on Its Stablecoin Investments
The SEC did not specify how Huynh used his TerraUSD holdings, but during the period in question, the Terra blockchain was offering up to 20% annual returns on UST deposits through its Anchor Protocol lending service.
Terra ultimately collapsed amid a broader downturn in the crypto market and a wave of user withdrawals from its ecosystem.
TerraUSD was designed to maintain a $1 value through an algorithmic link with Terra’s native token, LUNA. However, as LUNA’s price plummeted, TerraUSD lost its peg, triggering a death spiral that caused both tokens to crash.
Terra co-founder Do Kwon is currently awaiting trial in the U.S. on multiple fraud charges related to the collapse.
