(Arstechnica) - A federal judge sentenced a 53-year-old Kansas man to more than 24 years in prison after the former bank CEO abused his trusted position to embezzle $47 million after falling for a cryptocurrency scam that he believed would make him wildly rich.
In a press release, the US Attorney's Office said that Shan Hanes was driven by "greed" when directing bank employees to transfer millions in funds to a sketchy crypto wallet managed by still-unknown third parties behind the so-called "pig butchering" scheme.
Hanes was first targeted by scammers in late 2022, apparently when he got a message from an unidentified co-conspirator on WhatsApp, prosecutors said. After blowing through his own funds seeking promised profits, Hanes stole tens of thousands from a local church, then a local investor club, and finally his daughter's college fund, NBC News reported. Then when all those wells dried up, he started stealing bank funds—all in the false hopes that sending more and more money to the scammers would somehow "unlock the supposed returns" on his crypto investments.
In total, Hanes made 11 wire transfers using bank funds between May 2023 and July 2023. But instead of getting rich quick, Hanes never realized any profits at all, the US Attorney's Office said.
He pleaded guilty to one count of embezzlement by a bank officer after he singlehandedly caused the collapse of Heartland Tri-State Bank (HTSB) in Elkhart, Kansas, the press release said.
Because the bank was insured by the Federal Deposit Insurance Corporation (FDIC), the FDIC "absorbed the $47.1 million loss" after "Hanes’ fraudulent actions caused HTSB to fail and the bank investors to lose $9 million," the US Attorney's Office said. On top of those losses, Hanes' fraudulent actions caused "catastrophic losses to bank customers who relied on the bank for the safekeeping of their savings," the press release confirmed.
According to NBC News, Hanes missed at least one opportunity to realize that he was being scammed. After he asked for a $12 million loan from a neighbor, Brian Mitchell, his neighbor detected the scam and refused to lend the money.
"I said, 'You’re in a scam, walk away,'" Mitchell told NBC News.
But Hanes didn't walk away. Going the other direction, he directed bank employees to wire millions more to scammers after he got the warning from Mitchell. It wasn't until Mitchell heard from a bank employee that Hanes had wired money out of the bank that Mitchell insisted on speaking to the bank's board.
Days later, Hanes was fired, NBC News reported. But even then, Hanes never believed he was being scammed, reportedly telling Mitchell that he was still scheming to find a way to recover his make-believe profits right up to the moment he was arrested.
"He said ... 'If I just had another two months, I could get the money back,'" Mitchell told NBC News.
Law enforcement and government officials have warned that pig-butchering scams are growing increasingly common, urging people to "think twice" to avoid being victimized. Last year, the US Department of the Treasury’s Financial Crimes Enforcement Network issued an alert, which explained in detail how the scams commonly work and laid out red flags to watch out for.
Victims may never fully recover losses, DOJ says
A Kansas FBI agent, Stephen Cyrus, said in the press release that as CEO, Hanes violated "the trust and confidence of the community of Elkhart" by embezzling the funds.
Mitchell described Hanes' deceptions and manipulations as "pure evil," while Cyrus said that it was Hanes' "job" and "the bank’s job" to "protect its customers and identify fraudulent scams—not to participate in them."
In a court filing at sentencing, Hanes' lawyer, John Stang, chalked up his client's misdeeds to "bad choices," reminding the court that Hanes had been deceived, too, by "an extremely well-run cryptocurrency scam."
"He was the pig that was butchered," Stang wrote. "Mr. Hanes’s vulnerability to the Pig Butcher scheme caused him to make some very bad decisions, for which he is truly sorry for causing damage to the bank and loss to the Stockholders."
Hanes faced a maximum penalty of 30 years. While Judge John Broomes ordered him to serve less time than that, his sentence of more than 24 years is 29 months longer than prosecutors had requested, NBC News reported.
Right now, it's unclear how or when victims will be repaid for losses. Broomes ordered "that restitution be finalized at a separate hearing within the next 90 days," the US Attorney's Office said.
Victims may never fully recover losses, DOJ says
A Kansas FBI agent, Stephen Cyrus, said in the press release that as CEO, Hanes violated "the trust and confidence of the community of Elkhart" by embezzling the funds.
Mitchell described Hanes' deceptions and manipulations as "pure evil," while Cyrus said that it was Hanes' "job" and "the bank’s job" to "protect its customers and identify fraudulent scams—not to participate in them."
In a court filing at sentencing, Hanes' lawyer, John Stang, chalked up his client's misdeeds to "bad choices," reminding the court that Hanes had been deceived, too, by "an extremely well-run cryptocurrency scam."
"He was the pig that was butchered," Stang wrote. "Mr. Hanes’s vulnerability to the Pig Butcher scheme caused him to make some very bad decisions, for which he is truly sorry for causing damage to the bank and loss to the Stockholders."
Hanes faced a maximum penalty of 30 years. While Judge John Broomes ordered him to serve less time than that, his sentence of more than 24 years is 29 months longer than prosecutors had requested, NBC News reported.
Right now, it's unclear how or when victims will be repaid for losses. Broomes ordered "that restitution be finalized at a separate hearing within the next 90 days," the US Attorney's Office said.
