SEC Orders Online Lending Platform Founder to Pay $10.6M for Defrauding Investors

The U.S. Securities and Exchange Commission has issued a cease-and-desist order against Huynh Tran Quang Duy, also known as Duy Huynh, the founder and sole owner of the now-defunct online lending platform Const LLC (d/b/a MyConstant), which operated out of California and Vietnam. The order resolves charges that Huynh, age 42, made material misrepresentations to investors and misappropriated their funds in a fraudulent scheme.

According to the SEC’s findings, Huynh falsely promoted MyConstant’s “Loan Matching Service.” The offering was marketed as a low-risk investment where pooled funds would be lent to borrowers, with each loan backed by crypto assets valued at a minimum of 150% of the loan amount. From September 2020 to November 2022, over 4,000 investors, primarily in the United States, invested more than $20 million based on these claims.

MyConstant’s website boasted “risk-free investment” and “100% of our users have no loss,” promising attractive annual returns of up to 10%.

The SEC’s findings, however, paint a different picture. Huynh, a dual citizen of the United States and Vietnam, did not use the majority of investor funds for collateralized loans as promised. Instead, he systematically misused and misappropriated the money for his own purposes. The SEC found that Huynh personally transferred approximately $415,000 in investor funds outside the United States for his personal use.

Additionally, he misused at least $11.9 million of investor funds to purchase the crypto asset TerraUSD, i.e., UST, in his personal accounts. According to the SEC, he made this high-risk investment in an attempt to generate the high returns he had promised. When UST’s price collapsed in May 2022, Huynh lost at least $7.9 million of the invested funds.

To keep the scheme afloat and prevent a rush of withdrawals, Huynh continued to make false representations to investors. He sent them periodic email summaries that fabricated details about the company’s lending activities, including false claims about the number and value of loans matched during specific periods.

The scheme unraveled in November 2022 when MyConstant abruptly ceased operations and halted all customer withdrawals, citing “rapidly deteriorating market conditions.” To date, the company has only managed to return about $1.8 million to investors. Its remaining assets, valued at less than $10 million, have been placed in a trust for distribution through a private lawsuit.

In the settlement, Huynh, who was never registered with the SEC, consented to the findings without admitting or denying them. He has been ordered to pay a total of $10,619,031, which includes $8,347,720 in disgorgement, $1,521,311 in prejudgment interest, and a civil monetary penalty of $750,000. These funds will be held by the SEC for potential distribution to the harmed investors.

The SEC has also permanently barred him from acting as an officer or director of any public company, in addition to a cease-and-desist order from future violations of federal securities laws.

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