Ex-CEO of Kansas bank sentenced to 24 years in prison for cryptocurrency scam.

• A former CEO of a small Kansas bank was given a prison sentence of over 24 years for stealing $47 million from the bank.
• Federal prosecutors stated that Shane Hanes, also known as Shan, transferred funds from Heartland Tri-State Bank to cryptocurrency wallets controlled by scammers who deceived him in a "pig butchering" scheme that targeted his greed.
• In 2023, one of the five US banks that failed was Heartland Tri-State, which collapsed due to a massive embezzlement.

A former CEO of a small Kansas bank was convicted and sentenced to over 24 years in prison for embezzling $47 million from the bank and sending it to cryptocurrency wallets controlled by scammers who had deceived him in a "pig butchering" scheme that exploited his greed, according to federal prosecutors.

In 2023, Heartland Tri-State Bank in Elkhart, one of only five U.S. banks that failed, collapsed due to the massive embezzlement by ex-CEO Shan Hanes in a series of wire transfers over just eight weeks.

According to records from U.S. District Court in Wichita, Kansas, Hanes, 53, defrauded funds from a local church, investment club, and a daughter's college savings account to purchase cryptocurrency, as the scammers claimed they needed more funds to unlock the supposed returns on their investments.

Despite stealing money, Hanes failed to make any profit and lost all the stolen funds due to the scam.

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

In the sentencing hearing, Brian Mitchell stated that Hanes' actions were "pure evil." Mitchell, who lived next to Hanes in Elkhart, a small town of approximately 2,000 people in southwestern Kansas, north of the Oklahoma panhandle, made this statement.

More than 30 shareholders from Mitchell's farm and movie theater chain businesses attended Hanes' sentencing, over a year after their stock value was wiped out in the failure at Heartland Tri-State bank.

According to Mitchell's phone interview with CNBC on Wednesday, some individuals lost 70% of their retirement funds due to Hanes' actions.

One local woman is struggling to afford a nursing home for her 93-year-old mother, while another woman is unable to retire due to crime, Mitchell stated.

Despite hearing victims describe the effects of his crime, the CEO, Hanes, showed little to no remorse for his actions, which affected the investment club, of which Mitchell, who was not a shareholder but a member, was a victim.

Mitchell described the scene in the courtroom where Shan looked over his left shoulder for a second, didn't make eye contact, and said "Sorry."

"And that was it."

Broomes imposed a stiff sentence on Hanes and ordered him to be taken into custody immediately, causing Hanes to look shocked, Mitchell said.

For years, Mitchell viewed Hanes as a "good guy" who, like others in Elkhart, contributed to helping others in the community when needed and spoke about community banking at his local church. Hanes also testified before Congress multiple times about community banking.

In late 2022, Hanes, a father of three daughters and married to a school teacher, began stealing after being targeted in a pig-butchering scheme, according to prosecutors and bank regulators.

The scheme was described in a court filing as a scammer persuading a victim (a pig) to invest in supposedly legitimate virtual currency investment opportunities and then stealing the victim's money, butchering the pig.

In December 2022, Hanes, who had served on the board of the American Bankers Association and was chairman of the Kansas Bankers Association, began making transactions to buy cryptocurrency, which was apparently prompted by communication with an unidentified co-conspirator on the electronic messaging app 'WhatsApp,' according to a court filing by prosecutors.

The identity of the co-conspirator or conspirators is still unknown, according to the filing.

In early 2023, Hanes used stolen funds from Elkhart Church of Christ and Santa Fe Investment Club to purchase crypto, according to prosecutors and a defense filing.

In addition to using $60,000 from a daughter's college fund and nearly $1 million in stock from the Elkhart Financial Corporation, he also utilized the funds, his lawyer stated in a filing.

In May 2023, he started transferring money from Heartland Tri-State Bank to fraudulent accounts, beginning with a $5,000 transfer.

On May 30, two weeks after the initial transfer, Hanes wired an additional $1.5 million.

He made three wire transfers totaling $6.7 million to his crypto wallet, followed by a $10 million transfer two weeks later and another $3.3 million transfer three days after that.

Hanes instructed bank employees to carry out wire transfers and made numerous false statements to obtain access to funds for transfer, prosecutors stated. According to a report by the Office of the Inspector General of the Board of Governors of the Federal Reserve System, Heartland Tri-State employees bypassed the bank's wire policy and daily limits to approve Hanes' wire transfers.

The report stated that the CEO's significant influence in the bank and community likely caused Heartland employees to delay questioning or reporting the suspected fraudulent activities.

The 11 wire transfers from Hanes to the scammer "illustrate a typical pattern" in pig-butchering schemes, according to prosecutors.

"The defendant's embezzlement pattern involved an initial investment followed by another transaction to secure the funds, with additional investments requiring further funding to guarantee or unfreeze earlier transfers."

Mitchell confirmed to CNBC that he received a call from Hanes at 7:40 a.m. on July 5, 2023.

Mitchell recounted, "He said, 'Brian, I need your help, and you're the only guy who can help me.'"

Mitchell, who had survived prostate cancer two decades ago, thought Hanes was calling to inform him that he had the same type of cancer.

Before the bank officially opened to customers that morning, Mitchell met Hanes at Heartland Tri-State. However, the CEO informed him of something much different and stranger.

"Mitchell remembered how the first thing the man said was, 'Brian, I need to borrow $12 million for ten days, and I'll give you $1 million for loaning it to me,' and he thought to himself, 'Am I in a bank in Elkhart, Kansas, or in an alley with a loan shark in Chicago?'"

Hanes showed Mitchell a cryptocurrency account with $40 million and $42 million, and said he needed $12 million to verify the funds.

Mitchell stated that he had been in touch with a banker in Denver named "Jim" and "another guy in Oklahoma" who had invested in crypto held in Coinbase accounts, resulting in significant profits.

""I informed him that he was involved in a scam and asked if the money he was handling was from a bank. He replied, 'No, Brian,'" Mitchell stated."

Mitchell recalled how Hanes repeatedly emphasized the need for the $12 million to "activate" the funds already transferred to the crypto account in Hong Kong.

"I instructed you to board a plane, travel to Hong Kong, hire an interpreter, and retrieve the funds from the bank," Mitchell stated. "However, I informed you that I wouldn't be lending you the money. I then warned you that you were involved in a scam and advised you to leave."

After Mitchell rejected his requests, Hanes transferred $8 million to the scammers' accounts, according to court documents.

Four days after the initial payment, Hanes wired the scammers an additional $4.4 million.

Mitchell, unaware of the transfers, expressed concern after meeting with the CEO that Hanes might gain access to customers' deposits at the bank and transfer the $12 million he had requested.

"We kept checking our lines of credit," Mitchell said.

One week later, I was at the bank when an employee spotted me, she appeared so stressed. The woman informed me that Hanes had transferred funds out of the bank.

"I exclaimed, 'Do not utter another word to me, I must speak with a board member,'" Mitchell declared.

Mitchell recalled talking to a board member that night who went to speak with an attorney.

Hanes was fired within days.

On July 28, 2023, two weeks after its closure, Heartland Tri-State was taken over by the Federal Deposit Insurance Corp.

All depositors were safe, as Dream First Bank, National Association, of Syracuse, Kansas, took over deposits and wiped out shareholders.

As of the prior March, Heartland Tri-State had nearly $140 million in total assets and $130 million in total deposits.

For months, Hanes' involvement in the bank's failure due to a scam was not publicly known, although word quickly spread about the scam.

Federal prosecutors accused Hanes of embezzlement in February, while he was also separately charged in a 28-count complaint in Morton County, Kansas, related to looting a bank.

Hanes was under house arrest until his sentencing in federal court this week.

Last month, when Mitchell was out mowing his yard, he talked to him.

Hanes, who had previously traveled to Perth, Australia and was scammed into trying to recover funds he transferred, informed Mitchell that he believed there was a way to recover the money until his arrest.

Mitchell recalled how he said, "'If I just had another two months I could get the money back,'"

At Hanes' sentencing, Judge Broomes questioned Hanes about his actions, but Hanes lacked satisfactory responses.

Before announcing Hanes' sentence, Broomes later examined the victims in the courtroom's gallery.

Mitchell recalled that he said, "I want you to forgive Shan. Although I know he has hurt you, I want you to move on and find joy in your life. Let me discipline him."

Mitchell recounted that Broomes had told Hanes that despite several people acknowledging the former CEO's intelligence, "If you were that intelligent, you would have stopped this."

In a sentencing submission, Hanes' lawyer John Stang, who did not respond to a request for comment, stated that Mr. Hanes made poor choices after being involved in a well-run cryptocurrency scam.

"The Pig Butcher scheme caused Mr. Hanes to make bad decisions, resulting in damage to the bank and loss to the Stockholders."

In a statement, Kansas U.S. Attorney Kate Brubacher stated that Hanes' greed was unbounded, as he disregarded his professional obligations, personal relationships, and federal law.

Brubacher stated that not only did Shan Hanes betray Heartland Bank and its investors, but his illegal schemes also endangered the trust in financial institutions.