Former CEO of a small company bank of kansas Sentenced to more than 24 years in prison prison Robbed a bank of $47 million – money he deposited into a cryptocurrency wallet controlled by a crook who defrauded him in a “scam”pig slaughtering“This scheme fed his greed,” federal prosecutors said.
Former CEO embezzled huge amounts of public funds Shan Hanes A series of wire transfers in just eight weeks last year led to the collapse Federal Deposit Insurance Corporation take over Heartland Tri-State Bank Elkhart Bank is one of only five U.S. banks failed 2023.
According to records, Hanes, 53, also fraudulently transferred funds from a local church and investment club as well as his daughter’s college savings account, allegedly to purchase cryptocurrency, as the scammers insisted they needed more funds to free him expected return on investment. U.S. District Court in WichitaKansas.
But Hanes never realized any profits and lost all the money he stole to the scam.
Judge John Broomes sentenced Hanes on Monday to 293 months in prison, 29 months more than prosecutors had sought after he pleaded guilty in May to one count of corruption by a bank official.
“I called his actions ‘pure evil,'” Brian Mitchell said at the sentencing hearing. Kerhart is a small town of about 2,000 people in southwestern Kansas, north of the Oklahoma Panhandle.
Mitchell, whose farm and movie theater chain banks in the heart of the tri-state area, said about 30 of the bank’s shareholders attended Hanes’ sentencing more than a year ago after the failure wiped out the value of their stock. go.
Mitchell said in a phone interview with CNBC on Wednesday that “some people have lost 70%, 80% of their retirement savings” because of Hanes’ actions.
One local woman was “struggling to afford a nursing home” for her 93-year-old mother, while another was “unable to retire” due to crime, Mitchell said.
Mitchell, who is not a shareholder but belongs to the investment club victimized by the executive, said Hanes showed little remorse for his actions even as he heard his victims recount to the judge the impact of his crimes. meaning.
“Shan was facing the judge, and he just looked over his left shoulder for a second, without making eye contact, and then said, ‘I’m sorry,'” recalled Mitchell, describing the scene in the courtroom.
“That’s it.”
But Mitchell said Hanes had a look of “absolute shock” on his face when Broomes delivered the harsh sentence and ordered the former bank president’s immediate detention.
Mitchell said that over the years he considered Hanes a “good guy” who, like others in Elkhart, reached out to the small community in times of need and preached at local churches. Hanes has also testified before Congress on several occasions about community banking.
But prosecutors and banking regulators said Hanes, who has three daughters with his schoolteacher wife, began stealing in late 2022 after being targeted in a pig-slaughtering scheme.
The scheme was described in a court filing as “a scammer convincing a victim (a pig) to invest in a purportedly legitimate virtual currency investment opportunity and then stealing the victim’s money – butchering the pig.”
Hanes, who has served on the board of directors of the American Bankers Association and served as president of the Kansas Bankers Association, began conducting transactions to purchase cryptocurrency in December 2022, “which appears to have been facilitated through communications with unidentified co-conspirators on electronic wallets.” of”. Messaging application “WhatsApp,” prosecutors wrote in court documents.
“To date, the true identities of the conspirators remain unknown,” the document states.
According to prosecutors and defense documents, Hanes initially used personal funds to purchase cryptocurrencies, but in early 2023 he stole $40,000 from the Elkhart Church of Christ and from the Santa Fe Investment Club (Santa Fe Investment Club) stole $10,000.
He also used $60,000 from his daughter’s college fund and nearly $1 million in Elkhart Financial stock, his attorney said in a filing.
In May 2023, he began making wire transfers from Heartland Tri-State Bank to an account controlled by the scammer, initially in the amount of $5,000.
Two weeks later, on May 30, Hanes wired $1.5 million, and a day later he wired the same amount the next day, documents show.
Three days later, he directed his bank to transfer two wire transfers totaling $6.7 million to crypto wallets, with another $10 million transferred less than two weeks later and another $3.3 million transferred out a few days later.
Prosecutors wrote that Hanes told bank employees to execute wire transfers and made “numerous false statements to various individuals” to obtain funds for transfer. Heartland Tri-State employees circumvented the bank’s own wire policies and daily limits to approve Hanes’ wire transfers, according to a report from the Office of the Inspector General of the Board of Governors of the Federal Reserve System.
“We believe the CEO’s dominant position at the bank and prominent role in the community contributed to Heartland employees’ reluctance to question or report suspected fraudulent activity earlier,” the report said.
A series of 11 wire transfers sent by Hanes to the scammers “illustrated a common pattern in hog slaughter schemes,” prosecutors wrote.
“First, an initial ‘investment’ is required, and then another transaction is made to secure or guarantee those funds,” prosecutors wrote. “Further ‘investments’ may be made, but there will always be additional funding requirements, “The defendants’ corrupt conduct clearly demonstrates this pattern.”
Mitchell confirmed this to CNBC and said he received a call from Hanes at 7:40 a.m. on July 5, 2023.
“He said, ‘Brian, ‘I need your help, and you’re the only one who can help me,'” Mitchell recalled.
Mitchell, who survived prostate cancer two decades ago, said he thought Hanes called him to say he had the same type of cancer.
But when Mitchell showed up to meet Hanes in the heart of the tri-state area before the bank officially opened to customers, the executive told him something very different and unfamiliar.
“The first thing he said was, ‘Brian, I need to borrow $12 million for ten days, and I’ll give you $1 million to lend to me,'” Mitchell recalled. “I sat there and I said, am I in a bank in Elkhart, Kansas, or am I in a loan shark alley in Chicago.”
Mitchell said that when he asked Hanes what he wanted the money for, Hanes “pulled out his phone and acted like he was logging in, and he showed me this $40 million, $42 million account”. “He said, ‘Brian, I have this money, and it’s in cryptocurrency, and I need $12 million to help verify the funds.’ “
Mitchell said Hanes then told him he was connected to a banker named “Jim” in Denver and “another guy in Oklahoma” who had invested in crypto held in a Coinbase account. Currency, where they make a lot of money.
“I told him, ‘You’re in a scam, man. You’re in a scam,'” Mitchell said. “I stopped him and said, ‘Are you playing with the money in the bank?’ He said, ‘No, Brian. “”
Mitchell recalled that Hanes kept telling him that he needed $12 million to “prime” the funds he had transferred to the crypto account, which he said was located in Hong Kong.
“I said, ‘Get on a plane, go to Hong Kong, hire a translator and go write a bank check'” to access the funds allegedly held there, Mitchell said. “Then I said, ‘I’m not going to lend you money.’ I said, ‘You’re being scammed, go away.
But prosecutors said in a court filing that later that day, after Mitchell rejected his request, Hanes had bank employees wire $8 million to the scammer’s account.
Two days later, Hanes had employees wire another $4.4 million to the scammers.
Meanwhile, Mitchell, who was unaware of the transfers at the time, said that after meeting with the CEO, he became concerned that Hanes would gain access to clients’ bank deposits and transfer the $12 million he requested.
“We’re always checking our credit limits,” Mitchell said.
“The next week, I was at the bank and an employee grabbed me and she looked stressed,” Mitchell said. The woman told him that Hanes had wired money from the bank.
“I said, ‘Don’t say another word to me … I have to talk to the board members,'” Mitchell said.
“I talked to a board member that night, and he went to talk to an attorney that night,” Mitchell recalled.
Hanes was fired within days.
Approximately two weeks later, on July 28, 2023, Heartland Tri-State was closed by the Kansas Bank Commissioner’s Office and placed into receivership by the Federal Deposit Insurance Corporation.
Shareholders were wiped out, but depositors lost no money because the National Association’s Dream First Bank of Syracuse, Kansas, assumed all deposits.
As of last March, Heartland Tri-State had total assets of nearly $140 million and total deposits of $130 million.
News of a scam that led to the bank’s collapse spread quickly, but Hans’s involvement was not revealed until months later.
Hanes had not been charged until federal prosecutors charged him with corruption last February. He was indicted in state court in Morton County, Kansas, on a separate 28-count count related to the bank robbery.
Hanes remains under house arrest until his sentencing in federal court this week.
“I talked to him last month when he was out mowing his yard,” Mitchell said.
Hanes, who at one point traveled to Perth, Australia, where he was defrauded in an attempt to recover funds he had transferred, told Mitchell he believed there was a way to recover the money before he was arrested.
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