Ex-bank CEO sentenced to 24 years in prison for misappropriating cryptocurrencies that led to bank collapse

Shan Hanes, the former CEO of Kansas Heartland Tri-State Bank, has been sentenced to over 24 years in prison for embezzling more than $47 million in bank funds, which ultimately led to the institution’s failure. Hanes’ actions caused a total loss of equity for investors and severely damaged confidence in financial institutions.

Fraudulent Transfers

Between May and July 2023, Hanes exploited his position as CEO to make 11 transfers of the bank’s funds to a cryptocurrency wallet connected to a “pig butchering” scam. This type of scam is a long-term financial fraud where scammers manipulate victims into investing in fake schemes, often through cryptocurrency, similar to how a pig is fattened before being slaughtered.

Initial Investments and Escalation

Court documents reveal that Hanes began investing in crypto with his own money in December 2022. However, by early 2023, he escalated his activities by embezzling funds not only from the bank but also from a local church and investment club. His illegal actions drained the bank’s resources, leading to its collapse and eventual closure.

Impact on Investors

The bank’s collapse resulted in a $47 million loss, which the Federal Deposit Insurance Corporation (FDIC) had to absorb. Investors, however, lost a total of $9 million due to the fallout. The U.S. Attorney’s Office for the District of Kansas emphasized that Hanes’ greed and betrayal not only devastated the bank but also jeopardised trust in financial institutions.

Betrayal of Trust

Special Agent Stephen Cyrus of the FBI's Kansas City Field Office noted that Hanes’ responsibility as a bank CEO was to protect customers and detect fraudulent schemes, not to engage in them. The actions of Hanes were a grave violation of both his professional duties and the trust placed in him by the bank and its stakeholders.