The U.S. Securities and Exchange Commission (SEC) has taken action against the Founder of a now-closed crypto lending platform MyConstant, Huynh Tran Quang Duy for illegitimately using customer funds and carrying out purchase of Terra’s UST stablecoin.
The terms have been agreed upon where Huynh would pay over $10.5 million in penalty to settle charges against him.
As per details shared in the SEC order, Huynh began offering a “Loan Matching Service” through MyConstant to prospective investors around May 2019. He informed investors that their funds would be utilized in a crypto-backed loan business providing returns of 6% to 10%. The platform collected more than $20 million from over 4,000 investors between September 2020 and November 2022.
However, Huynh deceived investors and used their deposits to invest in risky investments as well as for personal transfers outside the U.S. The SEC alleged that Huynh used approximately $11.9 million of customer funds to purchase TerraUSD, a stablecoin intended to maintain a value of $1, but which lost its USD-peg in May 2022.
This led to a loss of over $7.9 million to funds Huynh took out from the firm. He also misappropriated about $415,000 of investor money for personal use. Moreover, to hide the misuse, he falsely claimed that MyConstant was still issuing loans and sent fake summaries to investors.
MyConstant Shuts Down After Terra Crash
The firm abruptly ceased operations in November 2022, citing the crypto market crash and massive customer withdrawals. MyConstant has so far reimbursed investors around $1.8 million and placed the remaining assets (less than $10 million) in trust for repayment to investors.
Moreover, Huynh’s investment was tied to Anchor Protocol, which offered high returns on TerraUSD (UST) stablecoin deposits. But when the market fell and users withdrew funds, Terra’s system crashed dramatically. UST stablecoin lost its $1 peg, and its sister token LUNA crashed too. The entire collapse wiped out billions from the crypto market.
SEC Orders Penalties and Ban
Under the terms of the settlement, Huynh is required to pay $8.3 million in ill-gotten gains, which represent the profits he unlawfully obtained through misleading investors. Alongside, he is required to pay $1.5 million as prejudgment interest and ordered to pay a $750,000 civil penalty within 14 days.
Further, Huynh is also banned for lifetime from being an officer or director of any public company in the future, which disqualifies him from occupying positions of authority in companies registered with the SEC.
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