The former executive of a rural Kansas bank who admitted to embezzling tens of millions of dollars as part of a cryptocurrency scheme has been sentenced to more than 24 years in federal prison.
Shan Hanes, 53, of Elkhart, was sentenced Monday by U.S. District Judge John Broomes to 293 months in prison after previously pleading guilty in U.S. District Court to one count of embezzlement by a bank officer.
Bank CEO was 'the pig' in pig butchering scam
"Mr. Hanes made some very bad choices after being caught up in an extremely well-run cryptocurrency scam," his defense attorney, John Stang, wrote in a sentencing memorandum. "He was the pig that was butchered."
Hanes was the "pig" in a cryptocurrency scam known as "pig butchering," a term derived from fattening pigs before slaughter. That's where scammers steal money by convincing someone — the "pig" — to send funds for what they think is a legitimate investment, and they may get more money by promising larger returns on continued fake investments.
Federal Reserve investigators saidHanes fell for the scam while CEO of Heartland Tri-State Bank, and federal prosecutors said he initiated several wire transfers totaling $47.1 million. The money came from the bank and went to a crypto wallet, which were then transferred to unidentified third parties.
"Mr. Hanes, as the CEO of Heartland Tri-State Bank, held the trust and confidence of the community of Elkhart, KS, but he violated that trust," said special agent in charge Stephen Cyrus, of the FBI Kansas City field office, in a statement. "He attempted to benefit financially by embezzling funds from the bank. His idea to get rich quick, in all reality, was a pig butchering scheme. His involvement in this scheme ultimately led to the bank’s collapse. His job, the bank’s job was to protect its customers and identify fraudulent scams — not to participate in them."
More:What is pig butchering, the crypto scam that hit a Kansas bank? Here’s what to know.
FDIC absorbed loss from failed bank
The Federal Deposit Insurance Corporation, which had insured the bank, absorbed the $47.1 million loss. The bank failed, and investors lost $9 million.
Kansas bank regulators deemed Heartland insolvent in July 2023. At the time, the Office of the State Bank Commissioner didn't go into details on what caused the bank failure, which it called "an isolated event." The collapse came at a time of public unease following a series of high-profile national bank failures.
"Hanes' greed knew no bounds," U.S. Attorney Kate E. Brubacher said in a press release. "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. Today's sentence is a measure of justice for the victims, and a statement that the U.S. Department of Justice will hold those accountable who violate positions of trust for their own gain."
Judge gave harsher sentence than prosecutors asked for
Court records indicated the 293 months was the maximum under the guideline range and was more than what prosecutors and defense attorneys recommended.
Prosecutors had requested 264 months — the midpoint of the guideline range — writing in a sentencing memorandum that Hanes deserves "stringent punishment."
"The public and the financial system at-large deserve confidence in their institutions and the authorities responsible for that trust," wrote assistant U.S. attorney Aaron Smith. "The Court must protect the community from further crimes of the defendant while promoting respect for the law and providing deterrence."
Hanes' attorney had asked for a more lenient sentence of a downward variance, or at least the 235 months at the lower end of the guidelines.
Stang wrote that his client "concedes that this offense is a serious felony" and "has accepted full responsibility for his actions." He noted that Hanes did not financially benefit from the scheme, and that a longer sentence would decrease his ability to pay restitution.
"Falling victim to this scam does not excuse the illegal actions taken by Mr. Hanes in wrongfully taking money from the bank, resulting in the bank's failure and the loss to the Stockholders," Stang wrote.
"Mr. Hanes is sorry about the loss he caused to the community and specifically the Stockholders of the Elkhart Financial Corporation," Stang added. "These people were his friends, co-workers, and neighbors, and all that he can do at this point is try to pay back the restitution upon his release from prison."
Restitution will be finalized at a separate hearing.
State court prosecution is ongoing
Meanwhile, Hanes also faces 28 criminal charges in Morton County District Court stemming from the crypto scheme. His attorney said the potential sentence in that case would be 86 months, and the county attorney wants it to run consecutive to the federal sentence.
That case is currently scheduled to go to trial in October.
Jason Alatidd is a Statehouse reporter for The Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X@Jason_Alatidd.
