Crypto scam wrecks Kansas bank, sends CEO to prison

The former CEO of a small Kansas bank was sentenced to more than 24 years in prison for looting the bank of $47 million — which he sent to cryptocurrency wallets controlled by scammers who had duped him in a “pig butchering” scheme that appealed to his greed, federal prosecutors said.

The massive embezzlement by ex-CEO Shan Hanes in a series of wire transfers over just eight weeks last year led to the collapse and FDIC takeover of Heartland Tri-State Bank in Elkhart, one of only five U.S. banks that failed in 2023.

Hanes, 53, also swindled funds from a local church and investment club — and a daughter’s college savings account — to transfer money, purportedly to buy cryptocurrency as the scammers insisted they needed more funds to unlock the supposed returns on his investments, according to records from U.S. District Court in Wichita, Kansas.

But Hanes never realized any profit, and lost all of the money he stole, as a result of the scam.

Judge John Broomes on Monday sentenced Hanes to 293 months in prison — 29 months more than what prosecutors requested after he pleaded guilty in May to a single count of embezzlement by a bank officer.

During the sentencing hearing, “I called his actions ‘pure evil,’ ” said Brian Mitchell, who for years was Hanes’ next-door neighbor in Elkhart, a town of 2,000 or so people in southwestern Kansas, north of the Oklahoma panhandle.

Mitchell, whose farm and movie theater chain businesses banked at Heartland Tri-State, said there were around 30 shareholders in the bank who attended Hanes’ sentencing, more than a year after their stock value was wiped out in the failure.

“There were people who lost 70, 80% of their retirement” as a result of Hanes’ actions, Mitchell told CNBC on Wednesday in a phone interview.

One local woman is “struggling to afford a nursing home” for her 93-year-old mother, while another woman “can’t retire” now because of the crime, Mitchell said.

Mitchell, who was not a shareholder but who belonged to the investment club victimized by the CEO, said Hanes showed little, if any, remorse for his actions, despite hearing victims tell the judge about the effects of his crime.

“Shan was facing the judge, and he just looked over his left shoulder for a second, and didn’t make eye contact, and said, ‘Sorry,’ ” Mitchell recalled, describing the scene in the courtroom.

“And that was it.”

But Hanes had a look of “absolute shock” on his face when Broomes imposed the stiff sentence and ordered the former bank chief taken into custody immediately, Mitchell said.

Mitchell said that for years he considered Hanes a “good guy,” who like other people in Elkhart pitched in to help others in the small community when they needed help, and preached at his local church. Hanes also testified several times before Congress about community banking.

But prosecutors and bank regulators said that Hanes, who has three daughters with his school teacher wife, began stealing after being targeted in a pig-butchering scheme in late…