Dive Brief:
- The Federal Reserve has banned Shan Hanes, the former CEO of failed Heartland Tri-State Bank, from the banking industry, it said Thursday in an order.
- Hanes “used his position to embezzle $47.1 million of bank funds in a cryptocurrency scheme that led” to the Elkhart, Kansas-based bank’s failure in July 2023, the Fed said in a news release Thursday.
- Hanes, who was sentenced to 24 years in prison in August, is barred from working for a bank, bank holding company, bank subsidiary or serving on a bank’s board, the Fed order said.
Dive Insight:
Hanes was the bank’s CEO from August 2017 to July 2023. Between May and July 2023, he made 10 wire transfers totaling $47.1 million in bank funds to his personal crypto wallet and, from there, to crypto accounts controlled by unidentified third parties, the Fed order said.
Although Hanes said he was “investing in lucrative digital currency products,” he was actually sending bank funds to scammers, which led to the bank’s insolvency. In July 2023, the bank was taken over by the Federal Deposit Insurance Corp. and sold to nearby Dream First Bank. The FDIC absorbed the loss, but bank investors lost $9 million.
Hanes was charged in February and pleaded guilty in May. He agreed to pay restitution up to $60.5 million, the Fed order noted.
Hanes’ 24-year sentence represented the maximum under the guidelines for one count of embezzlement as a bank officer.
The scam was known as a “pig butchering” scheme – so named because crypto scammers “fatten” victims with a promise of profitable returns and then “slaughter” them before fulfilling those promises.
“Hanes’ greed knew no bounds. He trespassed his professional obligations, his personal relationships, and federal law,” Kate E. Brubacher, U.S. Attorney for the District of Kansas, said in an August statement. “Not only did Shan Hanes betray Heartland Bank and its investors, but his illegal schemes also jeopardized confidence in financial institutions.”
