Crypto Exec Agrees to Pay $10M to Settle SEC Claims Over TerraUSD Misuse

A cryptocurrency executive has agreed to pay more than $10 million to settle claims brought by the U.S. Securities and Exchange Commission (SEC) related to his alleged misuse of investor funds to purchase TerraUSD (UST), a stablecoin that collapsed in 2022 [1]. The executive, Huynh Tran Quang Duy—also known as Duy Huynh—operated MyConstant, a now-defunct crypto lending platform that promised investors returns of up to 10% by using their funds for crypto-backed loans [1]. According to the SEC, Duy misappropriated $11.9 million of customer deposits to buy UST, a stablecoin tied to the Terra blockchain [1].

The investment turned disastrous when UST depegged from the U.S. dollar in May 2022, triggering a collapse that erased billions of dollars in value [1]. The SEC alleges that Duy lost over $7.9 million from the TerraUSD position and further misappropriated approximately $415,000 of investor funds for personal use [1]. To settle the claims, Duy agreed to pay $8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $750,000 civil penalty [1].

The settlement does not involve an admission or denial of wrongdoing by Duy, who is a dual citizen of Vietnam and the U.S. [1]. The funds will be returned to affected investors through a court-supervised process. This marks the first instance of restitution for MyConstant investors, following regulatory actions against the company from multiple jurisdictions [1].

The SEC’s enforcement action highlights its expanding focus on misconduct in the crypto lending and stablecoin sectors. MyConstant’s business model—pooling and lending customer funds to generate returns—was presented as a “low-risk” investment, attracting over $20 million from more than 4,000 investors between 2020 and 2022 [1]. The agency emphasized that the firm misrepresented the nature of its operations and misled investors about the safety of their funds [1].

This case also reflects the broader fallout from the TerraUSD collapse. The incident contributed to a wider market downturn and exposed flaws in the design of algorithmic stablecoins [1]. TerraUSD was algorithmically linked to its native token, LUNA, to maintain a $1 peg. When LUNA’s price plummeted, the stablecoin lost its peg, creating a death spiral that wiped out billions [1]. The collapse of Terra’s ecosystem remains one of the most significant financial crises in the crypto industry.

The settlement underscores the SEC’s growing ability to enforce accountability in the crypto space, particularly in complex financial infrastructures that operate with limited oversight [1]. While the case does not set a formal legal precedent, it contributes to a pattern of enforcement actions reflecting the agency’s strategic shift toward tighter regulation of digital assets [1].

As the crypto sector continues to evolve, cases like this reinforce the need for investors to exercise caution and demand transparency from platforms handling their assets [1]. The SEC’s actions signal that regulatory scrutiny will intensify, particularly for firms that fail to safeguard customer funds or engage in deceptive practices [1].

Source: [1] Crypto Exec to Pay $10M to Settle SEC Claims Over Betting on TerraUSD (https://cointelegraph.com/news/my-constant-founder-settle-sec-claims-terrausd-bet)