The reactive power and voltage compensation principles of static synchronous compensator (STATCOM) are introduced. In order to easily increase the output voltage levels, a STATCOM based on modular multilevel converter (MMC) is proposed as well. Since the conventional control strategy is mostly focused on the system performance with balanced load and its control performance is usually unsatisfying under unbalanced conditions. In this paper, the STATCOM is analyzed using positive, negative sequence model and based on that, the sequence control method is applied and elaborated. The voltages at point of common coupling (PCC) are locked by applying the decoupled double synchronous reference frame-phase locked loop (DDSRF-PLL). The sub-module (SM) capacitor voltages of MMC are balanced by a distributed control strategy which avoids large amount of information exchange between central controller and local controllers. The simulation model of a five-level MMC based STATCOM is built in PSCAD/EMTDC. Simulation results validate the correctness of the proposed controllers.