Former Kansas Bank CEO Sentenced to 24 Years for $47 Million Crypto Embezzlement

TLDR

• Former Kansas bank CEO Shan Hanes was sentenced to over 24 years in prison for embezzling $47 million in a cryptocurrency scam.
• Hanes made 11 transfers of bank funds to a crypto wallet involved in a “pig butchering” scheme between May and July 2023.
• The embezzlement led to the collapse of Heartland Tri-State Bank and a $9 million loss for investors.
• Hanes pleaded guilty to one count of embezzlement by a bank officer on May 23, 2024.
• The Federal Deposit Insurance Corporation (FDIC) absorbed the $47.1 million loss caused by Hanes’ actions.

Shan Hanes, the former CEO of Heartland Tri-State Bank in Elkhart, Kansas, has been sentenced to 24 years and 5 months in prison for embezzling $47 million in a cryptocurrency scam that led to the bank’s collapse.

The sentencing, announced on August 20, 2024, marks the conclusion of a case that shocked the local financial community and highlighted the risks of cryptocurrency-related fraud.

Between May and July 2023, Hanes used his position as CEO to make 11 transfers of bank funds, totaling over $47 million, to a cryptocurrency wallet involved in a scheme known as “pig butchering.”

This type of scam involves manipulating victims into investing in fake or fraudulent schemes, often through cryptocurrency, over an extended period.

The U.S. Attorney’s Office for the District of Kansas reported that Hanes’ actions directly caused the collapse of Heartland Tri-State Bank and its eventual closure. At the time, the bank was insured by the Federal Deposit Insurance Corporation (FDIC), which absorbed the $47.1 million loss. However, investors lost a total of $9 million from the fallout.

Hanes pleaded guilty to one count of embezzlement by a bank officer on May 23, 2024. The charge typically carries a maximum sentence of 30 years. In addition to the prison sentence, Hanes may face up to $60.5 million in restitution.

Court documents reveal that Hanes’ involvement with cryptocurrency began in December 2022 with investments of his own money. However, by early 2023, he had started embezzling funds from a local church and investment club to continue his crypto purchases.

U.S. Attorney Kate Brubacher stated,

“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.”

The case has drawn attention to the risks associated with cryptocurrency investments and the potential for abuse by those in positions of financial trust. Stephen Cyrus, special agent in charge of the FBI’s Kansas City Field Office, emphasized that Hanes’ responsibility, along with the bank’s, was to protect customers and identify fraudulent schemes, not to engage in them.

During the period of the embezzlement, Hanes reportedly lied to bank employees, the board of directors, and investors about the purpose of the wire transfers. The funds were subsequently transferred to other cryptocurrency accounts controlled by unidentified individuals.

The collapse of Heartland Tri-State Bank in July 2023 was initially described by Kansas bank regulators as “an isolated event,” without providing details on the cause. The bank’s assets were assumed by the FDIC and later acquired by a Syracuse bank.