• SEC filings reveal misappropriation of investor funds.
• False reports on loan performance were given to people who were investors.
• Settlement involves disgorgement, penalties, and an operation ban.

A former boss of crypto lending is spending money to resolve SEC charges. Huynh Tran Quang Duy, the owner of the company MyConstant, has agreed to pay over 10 million. The SEC charged him with the misappropriation of the investments of investors into risky bets with TerraUSD.

In the period between 2020 and 2022, the Duy platform offered an attractive loan matching service with the potential returns of up to 10 percent to investors with a low-risk promise. 

However, close to 12 million dollars of customer funds were privately transferred to buy TerraUSD stablecoin. Losses exceeded almost $8 million when TerraUSD went into a nosedive in May 2022.

How $20 Million Went From Loans to TerraUSD Gambling

Huynh received more than 4,000 investors with an interest of over 20 million in his now-defunct MyConstant. The pitch? The collateralized crypto loans at 150 percent value of the loans, which were, allegedly, low-risk and high-yield. 

Rather, Duy shifted money to his crypto wallets and purchased TerraUSD without the approval of the investors.

According to the SEC, Duy was also misappropriating the funds to the tune of about $415000  in the same period to spend on himself. Meanwhile, investors received false assurances. MyConstant even used the wrong loan summary reports that indicated that it had continued to lend well when it had not.

SEC’s Swift $10M Blow to Crypto Lending Misconduct

Duy resolved the case by accepting disgorgement of 8.3 million dollars. Topped off is prejudgment interest of 1.5 million and the civil penalty of 750,000 to be paid within 14 days. The settlement has no acknowledgment of wrongdoing but has a consent not to repeat the same violations.

The failure of TerraUSD resulted in the loss of billions of dollars, rattled the market, and forced authorities to take action. MyConstant is one of the platforms that has been affected in the aftermath of the exaggerated promises and poor organization.

Investor Returns: A Mirage Shattered by Terra’s Collapse

Source – sec.gov 

The marketing of MyConstant was based on the idea of a risk-free investment with returns that exceeded traditional markets. Unfortunately, millions of investors were left high and dry after the crippling crash of TerraUSD.

Recovery of the funds has been achieved by the SEC, which will compensate the MyConstant customers through court-supervised procedures, and the initial compensation that the MyConstant consumers received.

The case is an indicator of increased regulatory oversight of crypto companies that use pooled funds of investors in dark ways. It cautions operators and investors: In volatile markets, openness and regulatory compliance are the key.