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 CEO of HTSB, pleaded guilty to one count of embezzlement by a bank officer.

$47M Crypto Fraud

Court documents revealed that Hanes executed 11 unauthorized wire transfers between May and July 2023, directing $47.1 million of the banks funds to a cryptocurrency wallet as part of a scheme known as pig butchering, where unsuspecting investors are lured into fraudulent digital asset investments.

Special Agent in Charge Justin R. Bundy announced Haness 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 suffered a $9 million hit as the institution failed under the weight of the fraud.

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

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

Officials Condemn Ex-Bank CEO’s Role in Bank’s Downfall

U.S. Attorney Kate E. Brubacher condemned Hanes for his limitless greed, stating that “he trespassed his professional obligations, his personal relationships, and federal law. Not only did Shan Hanes betray Heartland Bank and its investors, but his 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, exploited his position for personal gain through a scam that led to the banks collapse. He added that Hanes’s responsibility was to protect the bank and its customers, not to engage in fraud.

Korey Brinkman, Special Agent-in-Charge of FHFA-OIG’s Central Region, noted that Hanes’s actions constituted a severe breach of trust, causing significant losses to bank customers and contributing to its downfall.

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

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