World Courant
The previous CEO of a small Kansas Financial institution was sentenced to greater than 24 years in jail jail for plundering the financial institution of $47 million — which he despatched to cryptocurrency wallets managed by con artists who defrauded him in a “pig slaughter” scheme that appealed to his greed, federal prosecutors mentioned.
The Huge Embezzlement by Ex-CEO Shan Hanes in a collection of transfers in simply eight weeks final 12 months led to the collapse and FDIC takeover of Hartland Tri-State Financial institution in Elkhart, one in every of solely 5 U.S. banks that failed till 2023.
Hanes, 53, additionally embezzled cash from a neighborhood church and an funding membership — and from a daughter’s school financial savings account — to wire cash, allegedly to purchase cryptocurrency, as a result of the scammers insisted they wanted more cash to unlock the supposed returns on his investments, in keeping with information from U.S. District Court docket in WichitaKansas.
However Hanes by no means made any cash from it and misplaced all the cash he stole because of the rip-off.
Choose John Broomes on Monday sentenced Hanes to 293 months in jail, 29 months greater than prosecutors had wanted he pleaded responsible in Could to 1 rely of embezzlement by a financial institution worker.
In the course of the sentencing listening to, “I known as his actions ‘pure evil,'” mentioned Brian Mitchell, a longtime neighbor of Hanes’ in Elkhart, a city of about 2,000 in southwestern Kansas, north of the Oklahoma Panhandle.
Mitchell, who runs a farm and movie show chain close to Heartland Tri-State, mentioned about 30 of the financial institution’s shareholders attended Hanes’ sentencing, greater than a 12 months after their inventory worth was worn out by the chapter.
“There are individuals who misplaced 70 to 80 p.c of their retirement” because of Hanes’ actions, Mitchell advised CNBC in a phone interview Wednesday.
A neighborhood girl is “struggling to afford a nursing residence” for her 93-year-old mom, whereas one other girl “cannot retire now” due to the crime, Mitchell mentioned.
Mitchell, who was not a shareholder however was a member of the funding membership that was victimized by the CEO’s crimes, mentioned Hanes confirmed little to no regret for his actions regardless of listening to the victims inform the decide in regards to the penalties of his crime.
“Shan stood going through the decide and regarded over his left shoulder for a second, with out making eye contact, and mentioned, ‘I am sorry,’” Mitchell recalled, describing the scene within the courtroom.
“And that was it.”
However Hanes regarded “fully shocked” when Broomes imposed the heavy sentence and ordered the previous financial institution govt to be arrested instantly, Mitchell mentioned.
Mitchell mentioned he thought of Hanes a “good man” for years, who, like different Elkhart residents, helped others within the small neighborhood after they wanted assist and preached at his native church. Hanes additionally testified earlier than Congress on neighborhood banking a number of occasions.
Prosecutors and financial institution regulators say Hanes, who has three daughters along with his trainer spouse, started stealing after he was focused in a pig slaughter in late 2022.
A court docket doc described the scheme as “a scammer convincing a sufferer (a pig) to put money into supposedly professional digital forex funding alternatives after which stealing the sufferer’s cash — slaughtering the pig.”
Hanes, who had served on the board of administrators of the American Bankers Affiliation and was president of the Kansas Bankers Affiliation, started making transactions to buy cryptocurrency in December 2022. This “appeared to have been prompted by communications with an unidentified confederate by way of the digital messaging software ‘WhatsApp,’” prosecutors wrote in a court docket doc.
“To today, the true identification of the confederate, or conspirators, stays unknown,” the file mentioned.
Hanes initially purchased cryptocurrency along with his personal cash, however in early 2023 he stole $40,000 from the Elkhart Church of Christ and $10,000 from the Santa Fe Funding Membership, prosecutors and a protection doc mentioned.
He additionally used $60,000 from his daughter’s school fund and almost $1 million in Elkhart Monetary Company inventory, his legal professional mentioned in a submitting.
In Could 2023, he started transferring cash from Heartland Tri-State Financial institution to accounts managed by scammers, initially transferring $5,000.
Two weeks later, on Could 30, Hanes transferred $1.5 million and made one other switch of the identical quantity the following day, the paperwork present.
Three days later, he ordered two transfers totaling $6.7 million from the financial institution to the crypto pockets. Lower than two weeks later, a whopping $10 million was transferred, and some days later, one other $3.3 million.
Hanes advised financial institution staff to make the transfers and “made quite a few misrepresentations to varied individuals” to realize entry to the funds so that they could possibly be transferred, prosecutors wrote. Heartland Tri-State staff circumvented the financial institution’s personal switch insurance policies and each day limits to approve Hanes’ transfers, in keeping with a report from the Workplace of the Inspector Normal of the Board of Governors of the Federal Reserve System.
“We imagine that the CEO’s dominant position inside the financial institution and his outstanding position in the neighborhood contributed to Heartland staff’ reluctance to query or report the alleged fraudulent exercise sooner,” the report mentioned.
Prosecutors mentioned the collection of 11 wire transfers from Hanes to the fraudster illustrates “a standard sample” in pork slaughterhouses.
“First, there’s an preliminary ‘funding’ adopted by one other transaction essential to safe or assure these funds,” prosecutors wrote. “Additional ‘investments’ could also be made, however at all times require one other want for funds, to ensure or unfreeze the sooner transfers. This sample is clearly represented in defendant’s embezzlement.”
Mitchell confirmed that to CNBC, saying he obtained a name from Hanes at 7:40 a.m. on July 5, 2023.
“He mentioned, ‘Brian, I want your assist, and also you’re the one one who may also help me,’” Mitchell mentioned.
Mitchell, who survived prostate most cancers 20 years in the past, mentioned he thought Hanes was calling to say he had the identical type of most cancers.
However when Mitchell arrived at Heartland Tri-State to fulfill with Hanes earlier than the financial institution formally opened to prospects that morning, the CEO advised him one thing very completely different—and stranger.
“The very first thing he says is, ‘Brian, I have to borrow $12 million for 10 days, and I am going to offer you $1 million if you happen to lend it to me,'” Mitchell recalled. “I used to be sitting there and I mentioned, am I in a financial institution in Elkhart, Kansas, or in an alley with a mortgage shark in Chicago.”
When he requested Hanes what he wished the cash for, “Hanes takes out his cellphone and pretends to log in and he exhibits me this account with $40 million, $42 million in it,” Mitchell mentioned. “He mentioned, ‘Brian, I’ve this cash and it’s in cryptocurrency, and I want $12 million to confirm the funds.’”
Hanes advised him he had been involved with a banker in Denver named “Jim” and “one other man in Oklahoma” and that that they had invested in cryptocurrencies on Coinbase accounts, making some huge cash, Mitchell mentioned.
“I advised him, ‘You are in a rip-off, dude. You are in a rip-off,'” Mitchell mentioned. “I ended him and mentioned, ‘Is that this financial institution cash you are enjoying with?’ And he mentioned, ‘No, Brian.'”
Hanes saved telling him he wanted the $12 million to “activate” the funds he had already transferred to the crypto account, which he mentioned was in Hong Kong, Mitchell recalled.
“I mentioned, ‘Get on a aircraft, go to Hong Kong, rent an interpreter and choose up a financial institution test'” for the cash supposedly caught there, Mitchell mentioned. “Then I mentioned, ‘I am not going to lend you the cash.’ I mentioned, ‘You are in a rip-off, stroll away.'”
However later that very same day, after Mitchell rejected his pleas, Hanes had financial institution staff wire $8 million to the scammers’ accounts, prosecutors mentioned in a court docket doc.
Two days later, Hanes had its staff wire one other $4.4 million to the scammers.
Mitchell, who was unaware of the transfers throughout that interval, mentioned that after talking with the CEO, he grew to become involved that Hanes would entry prospects’ deposits with the financial institution and switch the $12 million he had requested.
“We continued to watch our credit score traces,” Mitchell mentioned.
“The following week I used to be within the financial institution and one of many staff caught me, she regarded so confused,” Mitchell mentioned. The lady advised him that Hanes had transferred cash out of the financial institution.
“I mentioned, ‘Do not say one other phrase to me… I’ve to speak to a board member,’” Mitchell mentioned.
“I spoke to a board member that night time, and he went to talk to a lawyer that night time,” Mitchell recalled.
Hanes was fired inside days.
About two weeks later, on July 28, 2023, Heartland Tri-State was closed by the Kansas Workplace of the State Financial institution Commissioner and bought by the Federal Deposit Insurance coverage Corp.
Shareholders have been worn out, however depositors misplaced no cash, as a result of Dream First Financial institution, Nationwide Affiliation, of Syracuse, Kansas, took over all of the deposits.
Heartland Tri-State had almost $140 million in complete property and $130 million in complete deposits as of March of final 12 months.
Information that the financial institution had failed in a rip-off unfold shortly, however Hanes’ involvement didn’t come to mild till months later.
Hanes remained unindicted till final February, when federal prosecutors charged him with embezzlement. He was individually indicted in state court docket in Morton County, Kansas, in a 28-count indictment associated to looting the financial institution.
Hanes was below home arrest till his sentencing this week in federal court docket.
“I spoke to him final month when he was mowing the garden,” Mitchell mentioned.
Hanes, who at one level traveled to Perth, Australia, and was scammed into retrieving the cash he had wired, advised Mitchell he was satisfied there had been a technique to get the cash again till he was arrested.
Crypto fraud destroys Kansas financial institution, CEO goes to jail
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