TLDR
- MyConstant founder misused $11.9M of investor funds to buy TerraUSD before collapse.
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SEC settlement includes $8.3M in disgorgement and $1.5M in interest.
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MyConstant raised $20M from over 4,000 investors between 2020 and 2022.
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Platform lost nearly $8M in TerraUSD collapse, leading to its closure in 2022.
Huynh Tran Quang Duy, the founder of MyConstant, has agreed to pay over $10 million to settle charges by the U.S. Securities and Exchange Commission (SEC). The charges relate to his use of investor funds to buy TerraUSD, a stablecoin that collapsed in 2022, resulting in substantial losses for investors.
The SEC’s decision to impose the settlement follows an investigation into Huynh’s actions, which involved diverting funds from his platform’s customers into high-risk investments.
The SEC claimed that Huynh misrepresented the nature of the investments made through MyConstant. He told investors that their funds would be used in a loan matching service that was backed by cryptocurrencies. However, it was revealed that Huynh used $11.9 million of customer funds to purchase TerraUSD, which was part of the now-defunct Terra blockchain ecosystem. This move led to significant losses when TerraUSD collapsed in May 2022.
MyConstant Founder SEC Settlement and Financial Penalties
As part of the settlement, MyConstant Founder Huynh is required to pay $8.3 million in disgorgement and $1.5 million in prejudgment interest to return funds to investors. Additionally, he must pay a $750,000 civil penalty. The settlement agreement also bars Huynh from serving as an officer or director of any publicly registered company. These actions are a direct consequence of his failure to maintain the low-risk investment strategy he had promised investors.
The SEC’s investigation revealed that between 2020 and 2022, MyConstant raised over $20 million from more than 4,000 investors.
Despite marketing itself as a platform offering safe, crypto-backed loans, Huynh’s business practices deviated from these claims. The funds that were supposed to be used for loans were instead misused for high-risk ventures like TerraUSD, which led to significant financial damage for investors when the stablecoin collapsed.
MyConstant Downfall and Investor Impact
MyConstant ceased operations in November 2022 after the collapse of TerraUSD and other major crypto assets. The platform, which had been offering returns between 6% and 10% annually, had attracted thousands of investors. However, with the collapse of the Terra blockchain, many investors found their funds significantly devalued.
The SEC’s investigation noted that Huynh continued to mislead investors even after the collapse by providing them with fabricated loan summaries to assure them that their investments were still safe.
The platform had marketed itself as a low-risk option for crypto-backed loans, yet the reality was far different. While TerraUSD offered high returns through its associated lending platform, Anchor Protocol, its algorithmic design made it vulnerable to market volatility. When TerraUSD lost its peg to the U.S. dollar in 2022, it triggered a crash that affected MyConstant and many other companies involved in the Terra ecosystem.
MyConstant Response and Future Plans for Investors
Since MyConstant’s closure, the platform has returned $1.8 million to its investors. The remaining assets, which amount to less than $10 million, have been placed in a creditor trust. MyConstant has been under scrutiny from various regulatory bodies since late 2022.
The California Department of Financial Protection and Innovation had issued a cease-and-desist order against the platform for offering unregistered securities and failing to comply with state securities laws.
The SEC’s settlement marks an important step in securing compensation for the affected investors. The establishment of a Fair Fund may also allow additional distributions to impacted parties in the future. For those who were involved with MyConstant, the settlement aims to ensure that some restitution is made, though the full recovery of lost funds may depend on the available assets and feasibility of further actions.
