A small Kansas bank's CEO was sentenced to over 24 years in prison for his involvement in a cryptocurrency scam that caused the bank to collapse and be taken over by the Federal Deposit Insurance Corporation.
Shan (pronounced Shane) Hanes, the CEO of Heartland Tri-State Bank, is facing charges of embezzling $47 million. According to federal prosecutors, he fell victim to a "pig butchering" scam and transferred the stolen funds to cryptocurrency wallets managed by the scammers. The scheme exploited his greed and financial vulnerabilities.
Hanes, 53, massively embezzled in a series of wire transfers over just eight weeks last year, leading to the collapse and FDIC takeover of Heartland Tri-State Bank in Elkhart, one of only five U.S. banks that failed in 2023.
He defrauded a local church, an investment club, and his daughter's college savings account. According to court records from the U.S. District Court in Wichita, Kansas, the scammers convinced him to transfer more funds to unlock supposed returns on his cryptocurrency investments.
Court Delivers Verdict In Shan's Case
Despite transferring significant funds, Hanes never profited from his actions and lost all the stolen money. On Monday, Judge John Broomes sentenced Hanes to 293 months in prison. The sentence exceeded the prosecution's recommendation of 264 months, which was made after Hanes admitted guilt to one count of embezzlement by a bank officer in May.
During the sentencing hearing, Brian Mitchell, a longtime neighbour of Hanes in Elkhart, Kansas, described his actions as "pure evil." Mitchell, a shareholder in Heartland Tri-State, said that around 30 fellow shareholders attended Hanes' sentencing more than a year after the bank's collapse wiped out their investments.
"There were people who lost 70, 80 percent of their retirement" due to Hanes' actions, Mitchell told CNBC in a phone interview on Wednesday.
According to Mitchell, one local woman is struggling to afford a nursing home for her 93-year-old mother, while another woman has been forced to delay her retirement due to the crime.
Mitchell, who was not a shareholder but who was a member of the investment club victimized by the CEO, said that Hanes showed little, if any, remorse for his actions despite hearing victims describe the devastating impact of his crime in court.
"Shan was facing the judge, and he just looked over his left shoulder for a second, and didn't make eye contact, and said, 'Sorry,'" Mitchell said, describing the scene in the courtroom. "And that was it." According to Mitchell, Hanes appeared to be in a state of "absolute shock" when Broomes imposed the harsh sentence and ordered his immediate arrest.
How Pig Butchering Scams Work
Prosecutors and bank regulators stated that Hanes, a father of three daughters, began embezzling funds after falling victim to a pig-butchering scam in late 2022. The court filing described the scheme, stating, "a scammer convincing a victim (a pig) to invest in supposedly legitimate virtual currency investment opportunities and then steals the victim's money — butchering the pig."
In February, a 37-year-old woman named Shreya Datta fell victim to a cryptocurrency romance scam that employed deepfake technology. The scammers manipulated her emotions and financial information, leading to significant financial loss and debt.
Researchers warn that pig butchering scams are on the rise, often beginning with a seemingly innocent wrong-number text message. These scams have been particularly effective in targeting cryptocurrency investors, with criminals stealing at least $75.3 billion in cryptocurrencies in recent years, according to a study published this year by researchers at The University of Texas at Austin.
