A federal judge sentenced a 53-year-old Kansas man to more than 24 years in prison after the former bank executive abused his position of trust to embezzle $47 million after falling for a cryptocurrency scam he believed would make him immensely rich.
In a press release, the U.S. Attorney's Office stated that Shan Hanes was driven by “greed” when he instructed bank employees to transfer millions of dollars to a dubious crypto wallet managed by as yet unknown third parties behind the so-called “pig slaughter” scheme.
Hanes first fell victim to scammers in late 2022, apparently when he received a message from an unidentified co-conspirator on WhatsApp, prosecutors said. After squandering his own money in pursuit of the promised profits, Hanes stole tens of thousands from a local church, then a local investor club, and finally his daughter's college fund, NBC News reported. When all those sources dried up, he began stealing bank funds – all in the false hope that by sending more and more money to the scammers, he would somehow “unlock the alleged returns” of his crypto investments.
In total, Hanes made eleven electronic transfers of bank funds between May 2023 and July 2023. But instead of getting rich quick, Hanes made no profits, according to the U.S. Attorney's Office.
He pleaded guilty to one count of embezzlement by a bank employee after single-handedly causing the collapse of Heartland Tri-State Bank (HTSB) in Elkhart, Kansas, the press release said.
Because the bank was insured by the Federal Deposit Insurance Corporation (FDIC), “the FDIC assumed the $47.1 million loss” after “Hanes' fraudulent actions caused the HTSB to fail and the bank's investors to lose $9 million,” according to the U.S. Attorney's Office. In addition to those losses, Hanes' fraudulent actions “caused catastrophic losses to bank customers who relied on the bank for the safekeeping of their savings,” the press release confirmed.
According to NBC News, Hanes missed at least one opportunity to realize he was being scammed. When he asked his neighbor Brian Mitchell for a $12 million loan, Mitchell noticed the fraud and refused to lend him the money.
“I said, 'You're involved in a scam, go away,'” Mitchell told NBC News.
But Hanes wouldn't be fobbed off. He went the other way and ordered bank employees to wire millions more to fraudsters after receiving Mitchell's warning. It was only when Mitchell learned from a bank employee that Hanes had wired money from the bank that Mitchell insisted on speaking to the bank's board of directors.
Days later, Hanes was fired, NBC News reported. But even then, Hanes never believed he was being scammed. He reportedly told Mitchell he was still plotting to get his alleged winnings back until his arrest.
“He said, 'If I only had two more months, I could get the money back,'” Mitchell told NBC News.
Law enforcement and government officials are warning that pig slaughter scams are becoming more common and are urging people to “think twice” to avoid becoming victims. Last year, the U.S. Treasury Department's Financial Crimes Enforcement Network issued an alert detailing how the scams typically work and offering warning signs to look out for.
Victims may never fully recover losses, Justice Department says
Stephen Cyrus, an FBI agent from Kansas, said in the press release that Hanes, as CEO, had “abused the trust of the Elkhart community” by embezzling the funds.
Mitchell called Hanes' deception and manipulation “pure evil,” while Cyrus said it was Hanes' “job” and “the bank's job” to “protect its customers and identify fraudulent schemes – not to participate in them.”
In a court document at the sentencing, Hanes' attorney John Stang attributed his client's misdeeds to “poor decisions” and reminded the court that Hanes, too, had been deceived by “an extremely well-run cryptocurrency scam.”
“He was the pig that was slaughtered,” Stang wrote. “Mr. Hanes' vulnerability to the Pig Butcher scheme caused him to make some very poor decisions that damaged the bank and caused losses to shareholders. He is sincerely sorry.”
Hanes faced a maximum sentence of 30 years. Although Judge John Broomes ordered a shorter sentence, his sentence of more than 24 years is 29 months longer than prosecutors asked for, NBC News reported.
It is currently unclear how and when the victims will be compensated for their losses. Broomes ordered “that restitution be finalized in a separate hearing within the next 90 days,” the U.S. Attorney's Office said.
In the community, people are still struggling to recover, Mitchell told NBC News, noting that some people have lost as much as 80 percent of their retirement savings. For at least one woman, retirement is now impossible, Mitchell said, and another local woman has struggled to pay for her 93-year-old mother's nursing home.
According to US Attorney Kate E. Brubacher, it is difficult to say if and when the victims will be able to heal their wounds.
“Hanes is a liar and master manipulator” who squandered “tens of millions of dollars in cryptocurrency” while “hatching plans to cover his tracks on the bank's losses,” Brubacher said. “Many victims will never fully recover the losses of their savings and retirement funds, but at least we at the Department of Justice can ensure that Hanes is held criminally accountable for his actions.”