SEC Fines MyConstant Founder Over $10 Million in TerraUSD Stablecoin Scam
The U.S. Securities and Exchange Commission (SEC) has announced a settlement with Huynh Tran Quang Duy, the founder of cryptocurrency lending platform MyConstant, over allegations that he misused investor funds to purchase the now-collapsed TerraUSD (UST) stablecoin. Huynh, also known as Duy Huynh, has agreed to pay more than $10.5 million to resolve charges that he engaged in deceptive practices involving customer money.
Misleading Investors About Fund Use and Returns
According to an SEC order released on Tuesday, Huynh represented to MyConstant customers that their investments would be directed into a loan matching service backed by cryptocurrency assets, promising steady returns of approximately 10%. The SEC contends that, contrary to these claims, Huynh instead diverted $11.9 million of investor funds to purchase TerraUSD — a stablecoin linked to the Terra blockchain that infamously collapsed in mid-2022. MyConstant had marketed itself as a low-risk platform offering returns ranging between 6% to 10% by pooling and lending customer funds with cryptocurrency backing. From September 2020 through November 2022, the platform raised over $20 million from more than 4,000 investors. The SEC’s investigation revealed that approximately $415,000 of investor funds were also misappropriated for Huynh’s personal expenditures.
Massive Losses Tied to TerraUSD Collapse
TerraUSD, designed to maintain a $1 value through an algorithmic peg to the Terra (LUNA) token, entered a death spiral when LUNA’s price dramatically declined, causing both tokens to lose nearly all value. This collapse wiped out billions of dollars across the crypto market, with MyConstant alone suffering nearly $8 million in losses on its TerraUSD holdings.
Despite these losses, the SEC alleges that Huynh continued to falsely reassure investors regarding the safety of their investments, even sending fabricated summaries purportedly showing legitimate loans made by MyConstant to encourage further reinvestment.
Settlement Details and Regulatory Background
Huynh, who holds both Vietnamese and U.S. citizenship, has agreed to pay disgorgement exceeding $8.3 million to reimburse MyConstant investors along with $1.5 million in prejudgment interest. Additionally, he must pay a $750,000 civil penalty within 14 days of the order. Notably, Huynh neither admitted nor denied the SEC’s findings as part of the settlement.
MyConstant ceased operations in November 2022, citing adverse market conditions following the widespread crypto industry upheavals that year. The company has since returned $1.8 million to investors and placed its remaining assets in a creditor trust. Prior to the SEC’s action, California’s Department of Financial Protection and Innovation had already accused MyConstant of violating state securities laws.
Broader Context: The Terra Collapse and Its Fallout
Terra’s collapse is regarded as a pivotal event that depreciated the broader crypto market’s value by an estimated half a trillion dollars. At the time, the Terra ecosystem offered high-yield opportunities—for example, the Anchor Protocol allowed TerraUSD holders to earn up to 20% annual interest, attracting many investors seeking substantial returns.
The Terra ecosystem’s failure has since drawn intense regulatory scrutiny and legal actions targeting numerous associated projects and figures, including Terra co-founder Do Kwon, who faces multiple fraud charges in the United States.
Implications for Crypto Investors
This case underscores continuing risks within the decentralized finance (DeFi) and crypto lending sectors, particularly regarding transparency and the safeguarding of investor funds. The SEC’s enforcement actions aim to hold individuals and entities accountable for misleading investors and mismanaging entrusted assets.
Investors are advised to exercise caution, perform due diligence, and remain wary of promises of unusually high returns, especially when platforms lack clear regulatory compliance or transparency about fund management.
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