MyConstant Founder Settles SEC Claims Over TerraUSD Investment for $10.5 Million

Executive Summary

The founder of defunct crypto lending platform MyConstant has agreed to pay over $10.5 million to settle Securities and Exchange Commission charges related to unauthorized TerraUSD investments using customer funds.

MyConstant Founder Faces SEC Settlement

Huynh Tran Quang Duy, also known as Duy Huynh, promised MyConstant customers their investments would fund a secure loan matching service backed by cryptocurrency, generating 10% annual returns. However, SEC investigations revealed a different reality.

The Vietnamese-American entrepreneur allegedly diverted $11.9 million in customer funds to purchase TerraUSD (UST), a stablecoin connected to the Terra blockchain that suffered a catastrophic collapse in mid-2022.

SEC Settlement Details and Financial Penalties

Under the settlement agreement, Huynh must pay:

• $8.3 million in disgorgement to reimburse MyConstant customers

• $1.5 million in prejudgment interest

• $750,000 civil penalty within 14 days

The defendant neither admitted nor denied the SEC's findings as part of the settlement terms.

MyConstant Platform Overview and Operations

MyConstant launched in 2018, marketing itself as a low-risk crypto lending platform offering 6% to 10% returns through pooled customer investments. Between September 2020 and November 2022, the platform raised over $20 million from more than 4,000 investors worldwide.

The platform positioned itself as a secure alternative to traditional lending, promising steady returns backed by cryptocurrency collateral.

TerraUSD Investment Strategy and Losses

According to SEC documentation, Huynh invested heavily in TerraUSD during its peak popularity. The Terra ecosystem offered attractive yields through the Anchor Protocol, providing up to 20% annual returns on UST deposits.

However, when TerraUSD collapsed in May 2022, MyConstant lost approximately $7.9 million on its Terra investments. The platform also allegedly misappropriated $415,000 in customer funds for personal expenses.

Terra Ecosystem Collapse Impact

The Terra blockchain collapse eliminated an estimated half trillion dollars from the cryptocurrency market. TerraUSD maintained its dollar peg through an algorithmic mechanism tied to Terra's native LUNA token.

When LUNA's price declined, TerraUSD lost its peg, creating a death spiral that destroyed both tokens' value. Multiple crypto businesses, including MyConstant, suffered significant losses during this market event.

Platform Shutdown and Customer Recovery Efforts

MyConstant ceased operations in November 2022, citing widespread crypto industry failures that year. The platform has since returned $1.8 million to investors and placed all company assets in a customer trust fund.

This SEC settlement represents the first significant restitution opportunity for MyConstant customers who lost funds during the platform's collapse.

Regulatory Actions and Legal Precedent

California financial regulators ordered MyConstant to halt operations in late 2022 for violating state securities laws. The current SEC settlement establishes important precedent for crypto lending platform accountability.

Terra co-founder Do Kwon faces multiple fraud charges in the United States related to the blockchain's collapse, highlighting ongoing regulatory scrutiny of the crypto industry.

Industry Implications and Future Outlook

The MyConstant settlement demonstrates increased SEC enforcement against crypto platforms that misrepresent investment strategies or misuse customer funds. This case reinforces the importance of regulatory compliance in cryptocurrency business operations.

Crypto lending platforms face heightened scrutiny as regulators establish clearer guidelines for digital asset investment services and customer protection requirements.

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