Huynh Tran Quang Duy, also known as Duy Huynh, the creator of the now-defunct lending platform MyConstant, has agreed to pay over $10.5 million to settle claims made by the U.S. Securities and Exchange Commission (SEC). The SEC alleged that Huynh misused investor funds to purchase millions of dollars worth of TerraUSD (UST) before its collapse in mid-2022.

According to the SEC, Huynh told MyConstant customers that their money would be invested in a crypto-backed loan matching service that would yield 10% returns. However, the agency claimed that Huynh used $11.9 million of customer funds to buy UST, a stablecoin tied to the Terra blockchain. The Terra blockchain suffered a catastrophic collapse in mid-2022, wiping out billions of dollars from the crypto market. MyConstant was among several crypto-linked businesses that were negatively impacted by Terra's collapse, which is estimated to have removed half a trillion dollars from the crypto market.

The SEC stated that MyConstant, which began operations in 2018, advertised investments as "low risk" and claimed to offer returns between 6% and 10% by pooling and lending customer funds, all backed by crypto. Between September 2020 and November 2022, MyConstant reportedly raised over $20 million from more than 4,000 investors. The SEC alleges that Huynh misappropriated $11.9 million to purchase TerraUSD.

Huynh, who is a citizen of both Vietnam and the U.S., has agreed to pay disgorgement of over $8.3 million, prejudgment interest of $1.5 million, and a civil penalty of $750,000 within 14 days. The funds will be used to repay MyConstant customers. Huynh has neither admitted nor denied the SEC's findings.

Regulatory scrutiny of MyConstant began in late 2022, when California's finance regulator accused the company of violating the state's securities laws and ordered it to cease operations. The recent settlement marks the first time MyConstant customers could potentially receive restitution.

This settlement is part of a broader trend of increased regulatory action in the cryptocurrency space. The SEC has been focusing on crypto as a security and has directed its enforcement efforts primarily towards allegations of unregistered sales of securities. For example, in August 2021, Poloniex LLC agreed to pay over $10 million to settle charges for operating an unregistered online digital asset exchange. Similarly, in February 2022, BlockFi Lending LLC agreed to a $100 million settlement with the SEC for failing to register the offers and sales of its retail crypto lending product.