improper use of investor funds by MyConstant's founder results in a $10M penalty ordered by the Securities and Exchange Commission.
MyConstant Founder Settles with SEC over TerraUSD Misuse
Huynh Tran Quang Duy, the founder of the now-closed crypto lending platform MyConstant, has agreed to a settlement of over $10.5 million with the U.S. Securities and Exchange Commission (SEC) for illegally using approximately $11.9 million of customer funds to purchase TerraUSD (UST), an algorithmic stablecoin that collapsed in 2022.
MyConstant, which raised around $20 million from over 4,000 investors between 2020 and 2022, had promised investors a low-risk crypto-backed loan-matching service, promising returns of 6% to 10%. However, Huynh used the funds for purchasing TerraUSD, a move that was concealed from investors.
The collapse of TerraUSD caused losses of nearly $8 million to the platform and its investors. The SEC settlement requires Huynh to pay over $10.5 million, including $8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $750,000 penalty.
Besides the misappropriation of investor funds for purchasing UST, the SEC also alleged that Huynh diverted $415,000 for personal use. As part of the settlement, Huynh is required to pay the sums within 14 days.
The settlement highlights regulatory enforcement focusing on crypto lending platforms' risks and the dangers of algorithmic stablecoins exposed by the Terra ecosystem’s $40 billion crash. The case serves as a reminder of the importance of transparency and integrity in the crypto industry.
It is important to note that the collapse of Terra and Anchor Protocol is a separate incident from the SEC's charges against Huynh. Huynh's investment was tied to Anchor Protocol, which offered high returns on TerraUSD (UST) stablecoin deposits.
Huynh has been banned for life from being an officer or director of any public company in the future. The purchase of TerraUSD led to a loss of over $7.9 million to funds Huynh took out from the firm. MyConstant has shut down following the Terra crash.
References:
[1] SEC Press Release, SEC Charges Founder of MyConstant with Misappropriating Investor Funds (2022), available at: https://www.sec.gov/news/press-release/2022-247
[2] MyConstant, MyConstant Announces Cessation of Operations (2022), available at: https://myconstant.com/blog/myconstant-announces-cessation-of-operations/
[3] Coindesk, Terra’s Stablecoin UST Collapses as Market Panic Sweeps Crypto (2022), available at: https://www.coindesk.com/markets/2022/05/12/terras-stablecoin-ust-collapses-as-market-panic-sweeps-crypto/
[4] Cointelegraph, SEC Charges MyConstant Founder with Misappropriating Investor Funds (2022), available at: https://cointelegraph.com/news/sec-charges-myconstant-founder-with-misappropriating-investor-funds
[5] The Block, SEC Charges MyConstant Founder with Misappropriating Investor Funds (2022), available at: https://www.theblockcrypto.com/linked/107446/sec-charges-myconstant-founder-with-misappropriating-investor-funds
- The collapse of TerraUSD and the subsequent SEC charges against MyConstant founder Huynh Tran Quang Duy reveal the increasing focus of regulatory enforcement on risks within the crypto industry and the dangers of algorithmic stablecoins.
- The general news of the SEC's settlement with Huynh, revealed in various business and finance publications, also highlights the importance of transparency and integrity in the crypto-finance business.
- The criminal case against Huynh not only involves misappropriation of investor funds for the purchase of TerraUSD, but also includes allegations of using a portion of the funds for personal expenses, underscoring the intersection of finance and crime-and-justice within the digital currency industry.
