Former Bank of Kansas CEO Sentenced to Over 24 Years in $47 Million Crypto Fraud

A former Kansas bank executive was sentenced to 293 months in federal prison for embezzling $47.1 million in a cryptocurrency fraud scheme that led to the collapse of Heartland Tri-State Bank (HTSB).

Shan Hanes, 53, the former chief executive of HTSB, pleaded guilty to one count of embezzlement by a bank officer.

$47 Million Crypto Fraud

Court documents revealed that Hanes executed 11 unauthorized wire transfers between May and July 2023, directing $47.1 million of the bank’s funds to a cryptocurrency wallet as part of a scheme known as “butchering pigs,” where unsuspecting investors are lured into fraudulent investments in digital assets.

Special Agent in Charge Justin R. Bundy announced Hanes’ sentencing for his role in the $47.1 million embezzlement scam, which ultimately led to the failure of Heartland Tri-State Bank.

The Federal Deposit Insurance Corporation (FDIC), which insured HTSB at the time, absorbed the loss, while the bank’s investors took a $9 million hit as the institution collapsed under the weight of the fraud.

The FDIC confirmed that the fraudulent transfers were made to multiple cryptocurrency accounts controlled by unidentified third parties, and the bank was unable to recover their funds.

A federal judge has ordered restitution for the victims to be determined in a separate hearing within the next 90 days.

Officials condemn the role of the bank’s former CEO in the bank’s downfall

U.S. Attorney Kate E. Brubacher condemned Hanes for his unbridled greed, stating that he “transgressed his professional obligations, his personal relationships and federal law. Shan Hanes not only betrayed Heartland Bank and their investors, but their illegal schemes also jeopardized confidence in financial institutions.”

In a similar tone, FBI Special Agent in Charge Stephen Cyrus emphasized that Hanes, who was trusted by the Elkhart community, used his position for personal gain through a scam that led to the ‘collapse of the bank. He added that Hanes’ responsibility was to protect the bank and its customers, not to engage in fraud.

Korey Brinkman, special agent in charge of the FHFA-OIG’s Central Region, noted that Hanes’ actions constituted a serious breach of trust, causing significant losses to bank customers and contributing to its downfall.

Jon Ellwanger, another special agent, added that the sentence sends a strong message that these executives who compromise the stability of community banks will face justice.

He expressed pride in the cooperation with federal law enforcement that led to this outcome and thanked the U.S. Attorney’s office for ensuring that Hanes was held accountable for his crimes.

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