Former Heartland Tri-State Bank CEO Shan Hanes has been charged with embezzling $47.1 million in bank funds to buy cryptocurrency, court documents show.
Hanes, a three-decade employee of Heartland and its predecessor, was chief executive from 2008 until last year, when the firm collapsed due to what Kansas regulators at the time dubbed “an isolated event.”
What tanked the bank, according to Bloomberg, was Hanes’ crypto investments, which a wealthy Heartland customer close to the matter brought to the attention of regulators after Hanes asked him for a loan.
Heartland customer Brian Mitchell told authorities he saw a red flag when Hanes asked him for $12 million to help take his money out of a crypto investment, which had run into a supposed wire transfer issue. Mitchell declined to provide Hanes, who said the funds were not bank funds, with the loan, but learned later from a bank employee that Hanes did wire $12 million out of the bank.
Court documents filed in Kansas district court in Wichita allege that Hanes began buying crypto in December 2022 with his own money. By early 2023, however, some of the purchases were made with funds embezzled from a local church and local investment club; and in May 2023, Hanes started purchasing crypto with bank funds, prosecutors allege.
“Shan Hanes used his position and authority as CEO of Heartland Tri-State Bank to make and authorize the wire transfers or direct other employees to make the wire transfers on his behalf,” prosecutors allege. Through July 2023, Hanes embezzled bank funds “by causing at least 11 wire transfer financial transactions from Heartland Tri-State Bank” to purchase crypto, without the authority to do so.
It's possible, Bloomberg reported, that Hanes fell victim to “pig butchering,” where scammers “fatten” victims up with a pledge of profitable returns but “slaughter” them before making good on their promises.
The FBI warned the public in December of such scams, noting that it “anticipates a higher loss in funds with investment scams this year, primarily due to the increase in Cryptocurrency Confidence [‘pig butchering’] scams which are one type of investment scam following particular typologies to scam victims.”
Heartland’s $139 million in assets and $130 million in deposits were acquired in July by Syracuse, Kansas-based Dream First Bank, and the Office of the State Bank Commissioner of Kansas said the state’s banking sector was “unaffected by this event.”
At the time of Heartland’s collapse, Hanes was chairman of the Kansas Bankers Association, and he previously served at least one term on the American Bankers Association’s board of directors. Neither association responded to Banking Dive’s request for comment.
Hanes did not return a request for comment by Bloomberg.
If convicted, he faces up to 30 years in prison, followed by a supervised release of up to five years, as well as the forfeiture of all property derived from the embezzled amount.