Ex-CEO who fell for crypto scam and caused his bank to go bankrupt is sentenced to 24 years in prison

A former CEO of the defunct Kansas Heartland Tri-State Bank has been sentenced to more than 24 years in prison for embezzling funds through cryptocurrencies, ultimately driving the bank into bankruptcy.

Shan Hanes' actions subsequently led to the bank's bankruptcy, which meant a “complete loss of equity for investors,” according to a statement released on Monday. opinion by the U.S. Attorney's Office for the District of Kansas.

Between May and July 2023, Hanes used his position as CEO to make eleven transfers of bank funds valued at over $47 million to a crypto wallet involved in a pig slaughter plot.

Hanes pleaded guilty on May 23 to one count of embezzlement by a bank employee, which normally carries a maximum sentence of 30 years.

Court documents filed Beginning of the year indicate that Hanes' first cryptocurrency investments were made with his own money in December 2022. However, in early 2023, additional purchases were made by embezzling funds from a local church and an investment club.

A Pig slaughter Scam is a type of long-term financial fraud in which victims are manipulated into investing in fake or fraudulent schemes, often through cryptocurrency.

The term derives from the modus operandi of the fraud, comparing it to a farmer fattening a pig before slaughter. Fraudsters typically spend weeks or even months building a relationship with the victim.

The $47 million loss was the immediate cause of the bank's collapse and eventual closure, court documents say.

At the time, the bank was insured by the Federal Deposit Insurance Corporation, which absorbed the loss. Nevertheless, investors lost a total of nine million dollars as a result.

“Hanes' greed knew no bounds,” said U.S. Attorney Kate Brubacher in the statement. “He violated his professional duties, his personal relationships and federal law. Shan Hanes not only defrauded Heartland Bank and its investors, but also undermined trust in financial institutions with his illegal activities.”

Hanes' plan to quickly accumulate wealth was actually a pig slaughter plot that ultimately caused the bank's collapse, Special Agent in Charge Stephen Cyrus of the FBI's Kansas City field office said in the statement.

Cyrus said Hanes' and the bank's responsibility is to protect customers and detect fraudulent schemes, not to participate in them.

Edited by Sebastian Sinclair