Settlement Agreement with SEC
In a recent development, Huynh Tran Quang Duy, the founder of the now-discontinued lending service MyConstant, has consented to a settlement exceeding $10.5 million in response to allegations from the U.S. Securities and Exchange Commission (SEC). The SEC contended that Duy, also known as Duy Huynh, misappropriated investor capital to purchase the stablecoin TerraUSD, which ultimately suffered a dramatic collapse in mid-2022.
MyConstant’s Operations and Allegations
MyConstant positioned itself as a loan matching platform that promised returns ranging from 6% to 10%, incentivizing customers with a supposed low-risk investment backed by cryptocurrency. However, according to SEC documents released on Tuesday, more than $11.9 million of client funds were funneled into acquiring TerraUSD. The collapse of Terra and its associated stablecoin resulted in losses amounting to billions of dollars and significantly impacted the broader cryptocurrency market, erasing approximately half a trillion dollars in value.
The SEC’s order reveals that from 2020 to 2022, MyConstant successfully attracted over $20 million from in excess of 4,000 investors. Duy is implicated not only in the large-scale misallocation of funds but also in committing personal misappropriation of roughly $415,000 intended for operational use. He further compounded the issue by misleading investors about the security of their funds. Following the downturn in TerraUSD’s value, Duy allegedly attempted to retain investor confidence by sending fraudulent updates that depicted non-existent loan activities.
Settlement Terms and Company Closure
As part of the settlement, Duy will disburse $8.3 million plus an additional $1.5 million in prejudgment interest to reimburse affected MyConstant clients, alongside a civil penalty of $750,000, which he is obligated to pay within 14 days. Notably, he did not admit to or refute any findings from the SEC.
Founded in 2018, MyConstant ceased operations in November 2022, citing the fallout from the cryptocurrency market’s turmoil. The firm has initiated the process of restitution, having already returned $1.8 million to defrauded investors and established a trust to manage remaining assets.
Broader Implications in Cryptocurrency Markets
The SEC’s investigation comes amid ongoing scrutiny of cryptocurrency markets and the decline of several digital assets. The Terra blockchain, which initially lured investors with promised high yields of up to 20% on UST via the Anchor Protocol, ultimately unravelled due to the interplay of algorithmic mechanisms with a faltering market that de-pegged its stablecoin from the dollar, leading both UST and its sister token, LUNA, into a catastrophic collapse. Furthermore, the co-founder of Terra, Do Kwon, is currently facing multiple fraud charges in the U.S. related to the same events.
