Former MyConstant Exec to Pay $10.8M to Settle SEC Charges Over TerraUSD Misuse

A former executive of a crypto lending platform has agreed to pay $10.8 million to settle charges brought by the U.S. Securities and Exchange Commission (SEC) over the misuse of investor funds. Duy Huynh, founder of now-defunct platform MyConstant, used nearly $12 million in customer deposits to purchase TerraUSD (UST), a stablecoin that collapsed in May 2022, causing significant financial losses for investors [1]. The SEC alleges that Huynh misrepresented the platform’s lending practices and failed to disclose the high-risk TerraUSD exposure, which led to nearly $8 million in losses for customers [2].

Between 2020 and 2022, MyConstant attracted over 4,000 investors by offering collateralized loans with purportedly low risk and high returns. The platform claimed it was lending out funds at 150 percent of the loan value, but in reality, Huynh redirected funds to his personal crypto wallets to buy TerraUSD without investor consent [1]. The SEC also found that Huynh misappropriated approximately $415,000 for personal use during the same period [2].

To resolve the case, Huynh agreed to pay $8.3 million in disgorgement, $1.5 million in prejudgment interest, and a $750,000 civil penalty—all to be paid within 14 days. The settlement includes a permanent ban on operating as an investment fund or in the securities industry but does not involve an admission of wrongdoing [3]. The SEC emphasized that such settlements serve as a mechanism to recover funds for investors and deter similar misconduct without the need for prolonged litigation.

The enforcement action highlights the SEC’s increasing scrutiny of crypto platforms that engage in opaque or risky use of customer funds. MyConstant is one of several crypto firms to face regulatory consequences in the wake of the TerraUSD collapse, which triggered billions in losses across the crypto market [1]. The agency has intensified its focus on individual operators, particularly in the lending and stablecoin sectors, signaling a broader regulatory shift toward holding individuals accountable for investor harm [2].

The case also reflects the heightened risks associated with stablecoins when used in leveraged or speculative investments. The SEC has consistently argued that investors should not be exposed to such risks without full disclosure and proper safeguards. As the regulatory landscape in crypto continues to evolve, the agency is pushing for greater transparency and accountability across the industry [3].

Recovery of the funds will be managed through court-supervised procedures, with initial compensation already being distributed to affected customers. The settlement underscores a growing trend of regulatory enforcement in crypto, including recent actions against Tornado Cash and Binance, which demonstrate the SEC’s willingness to pursue both institutional and individual actors [1]. While Huynh neither admitted nor denied the charges, the financial penalty serves as a strong deterrent for others in the sector who may engage in similar conduct.

The enforcement action marks another step in the SEC’s broader strategy to ensure market integrity and investor protection in a sector historically plagued by opacity and mismanagement. As crypto firms expand their offerings, compliance with regulatory expectations is becoming not just a legal necessity but a business imperative.

Source:

[1] MyConstant Founder to Pay $10M to Settle SEC ...

(https://coincentral.com/myconstant-founder-to-pay-10m-to-settle-sec-allegations-over-terrausd/)

[2] Crypto Exec Agrees to Pay $10M to Settle SEC Claims ...

(https://www.ainvest.com/news/crypto-exec-agrees-pay-10m-settle-sec-claims-terrausd-misuse-2508/)

[3] SEC Fines Platform Founder $10M Over Crypto-Backed Scam

(https://www.law360.com/capitalmarkets)