A former CEO of a rural Kansas bank, who admitted embezzling tens of millions of dollars as part of a cryptocurrency scheme, was sentenced on Aug. 19 to nearly 25 years in federal prison, according to the Department of Justice (DOJ).
Shan Hanes, 53, of Elkhart, Kansas, was sentenced to 293 months in prison after pleading guilty to one count of embezzlement by a bank officer.
According to the DOJ, Hanes’s cryptocurrency scheme caused the bank to fail and investors to lose all equity.
While Hanes was the CEO of Heartland Tri-State Bank (HTSB), he initiated 11 outgoing wire transfers between May 2023 and July 2023 totaling $47.1 million of Heartland’s funds to a cryptocurrency wallet in a cryptocurrency scheme referred to as “pig butchering,” according to the DOJ.
Pig butchering is a scheme in which scammers build close relationships with victims and convince them to invest in cryptocurrency with a promise of high returns. Once victims have invested as much money as possible in the fraudulent cryptocurrency scheme, the scammers take their money and cut off all communication.
The funds were transferred to multiple cryptocurrency accounts controlled by unidentified third parties, while HTSB was insured by the Federal Deposit Insurance Corporation (FDIC).
The FDIC absorbed the $47.1 million loss, and Hanes’s fraudulent actions caused HTSB to fail and bank investors to lose $9 million.
“Hanes’ greed knew no bounds. He trespassed his professional obligations, his personal relationships, and federal law. Not only did Shan Hanes betray Heartland Bank and its investors, but his illegal schemes also jeopardized confidence in financial institutions,” U.S. Attorney Kate E. Brubacher said in a statement.
Stephen Cyrus, special agent in charge of the FBI Kansas City Field Office, said Hanes violated the trust and confidence of the Elkhart community.
“He attempted to benefit financially by embezzling funds from the bank. His idea to get rich quick, in all reality, was a pig butchering scheme,” Cyrus said in the DOJ statement. “His involvement in this scheme ultimately led to the bank’s collapse. His job, the bank’s job, was to protect its customers and identify fraudulent scams—not to participate in them.”
According to a report issued by the Office of Inspector General of the Board of Governors of the Federal Reserve System on the bank’s failure, there were “significant internal control breakdowns” and Hanes’s influence as a dominant official at the bank allowed for the series of fraudulent wire transfers to be initiated and processed.
Those wire transfers led to issues with Heartland’s capital and liquidity and caused the bank to become insolvent.
“As the CEO, the defendant had a duty to conduct business honestly but instead abused that trust and committed insider fraud, contributing to the failure of a bank and causing catastrophic losses to bank customers who relied on the bank for the safekeeping of their savings,” Korey Brinkman, special agent in charge of FHFA-OIG’s Central Region, said in the DOJ statement.
A federal judge ordered that restitution be finalized at a separate hearing within the next 90 days.
