Crypto 'Pig Butchering' Scam Wrecks Kansas Bank, Sends Ex-CEO To Prison For 24 Years (nbcnews.com) 75
An anonymous reader quotes a report from NBC News: 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. [...]
[P]rosecutors 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 2022. That scheme was described in a court filing as "a scammer convincing a victim (a pig) to invest in supposedly legitimate virtual currency investment opportunities and then steals the victim's money -- butchering the pig." Hanes, who had served on the board of the American Bankers Association, and been chairman of the Kansas Bankers Association, in December 2022 began making transactions to buy cryptocurrency, which "appeared to be precipitated by communication with an unidentified co-conspirator on the electronic messaging app 'WhatsApp,'" prosecutors wrote in a court filing. "To date, the true identity of the co-conspirator, or conspirators, remain unknown," the filing notes. Hanes initially used personal funds to buy crypto, but in early 2023 he stole $40,000 from Elkhart Church of Christ and $10,000 from the Santa Fe Investment Club, according to prosecutors and a defense filing. He also used $60,000 taken from a daughter's college fund, and nearly $1 million in stock from the Elkhart Financial Corporation, his lawyer said in a filing.
In May 2023, he began to make wire transfers from Heartland Tri-State Bank to accounts controlled by scammers, at first with a $5,000 transfer. Two weeks later, on May 30, Hanes wired $1.5 million and a day after that, he sent another transfer of the same amount the following day, filings show. Three days later he directed two wire transfers totaling $6.7 million to be sent by the bank to the crypto wallet, and a whopping $10 million less than two weeks later, and another $3.3 million days afterward. Hanes told bank employees to execute the wire transfers, and "made many misrepresentations to various people" to get access to the funds so they could be transferred, prosecutors wrote. Heartland Tri-State employees circumvented the bank's own wire policy and daily limits to approve Hanes' wire transfers, according to a report by the Office of the Inspector General of the Board of Governors of the Federal Reserve System.
[P]rosecutors 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 2022. That scheme was described in a court filing as "a scammer convincing a victim (a pig) to invest in supposedly legitimate virtual currency investment opportunities and then steals the victim's money -- butchering the pig." Hanes, who had served on the board of the American Bankers Association, and been chairman of the Kansas Bankers Association, in December 2022 began making transactions to buy cryptocurrency, which "appeared to be precipitated by communication with an unidentified co-conspirator on the electronic messaging app 'WhatsApp,'" prosecutors wrote in a court filing. "To date, the true identity of the co-conspirator, or conspirators, remain unknown," the filing notes. Hanes initially used personal funds to buy crypto, but in early 2023 he stole $40,000 from Elkhart Church of Christ and $10,000 from the Santa Fe Investment Club, according to prosecutors and a defense filing. He also used $60,000 taken from a daughter's college fund, and nearly $1 million in stock from the Elkhart Financial Corporation, his lawyer said in a filing.
In May 2023, he began to make wire transfers from Heartland Tri-State Bank to accounts controlled by scammers, at first with a $5,000 transfer. Two weeks later, on May 30, Hanes wired $1.5 million and a day after that, he sent another transfer of the same amount the following day, filings show. Three days later he directed two wire transfers totaling $6.7 million to be sent by the bank to the crypto wallet, and a whopping $10 million less than two weeks later, and another $3.3 million days afterward. Hanes told bank employees to execute the wire transfers, and "made many misrepresentations to various people" to get access to the funds so they could be transferred, prosecutors wrote. Heartland Tri-State employees circumvented the bank's own wire policy and daily limits to approve Hanes' wire transfers, according to a report by the Office of the Inspector General of the Board of Governors of the Federal Reserve System.
So many lives ruined (Score:5, Insightful)
Of all the gambling methods humanity devised, crypto is I suspect the most destructive.
Re:So many lives ruined (Score:5, Insightful)
Re:So many lives ruined (Score:5, Insightful)
Crypto is, and always has been, nothing but a scam.
EVERY "cryptocurrency" operation functions exactly the same [youtube.com] as a pump-and-dump [ledger.com] penny stock scam.
Re: (Score:2)
Crypto is, and always has been, nothing but a scam.
Perhaps. But there was no actual crypto involved in this scam.
Re:So many lives ruined (Score:5, Funny)
Crypto is, and always has been, nothing but a scam.
Clearly you are wrong, because a former President of The United States just launched his own crypto platform [slashdot.org], and fully embraced crypto at the Bitcoin conference 3 weeks ago [youtu.be]. (Here's a written transcript [singjupost.com])
If you can't trust a former US President's financial advice, you must have some kind of derangement syndrome.
Re: (Score:2)
Re: (Score:2)
Looks like it was 4, count them 4, casinos AND 2 casino holding companies he bankrupted.
There wasn't any crypto (Score:5, Insightful)
The way these scams typically work is that scammers target people who have no knowledge of how crypto works, and then directs them to a fake crypto exchange site. The site has all the usual things: are lots of tokens listed, blinking red and green numbers, charts, etc. And a deposit feature of course. But no withdrawal! The site is fake and controlled by the scammers, used to take the mark on the necessary journey until the eventual butchering.
So there was no crypto. Just someone who should've known better transferring USD into accounts scammers controlled. This sort of thing will continue long after the crypto hype cycle ends, as long as there are greedy people (on both sides) and a new esoteric asset class (and there's always a new one).
Re: (Score:2)
Re: (Score:2)
He should've known better than stealing, too.
Re: (Score:2)
Of all the gambling methods humanity devised, crypto is I suspect the most destructive.
Investment fraud schemes have existed for years, long before crypto was even an idea. This isn't the first nor the last time that scammers will get a sucker to pour millions into a "sure thing". And that's essentially what this guy thought he was doing; investing in a get-rich-quick scheme. The only differences between these crypto guys and Bernie Madoff is that that the later had a patina of respect before it all came crashing down.
Re: (Score:1)
I wish I had bought crypto. If I had bought even just 1% of the AES128 cipher, I'd be rich now. Rivest, Shamir and Aldeman must be loaded!
Re: (Score:2)
Pretty much. And it has no limits.
What? No handicapped orphans? (Score:1)
"Hanes, 53, also swindled funds from a local church and investment club -- and a daughter's college savings account..."
I see you're keepin' it classy, Ruling Class.
Re: (Score:2)
Or cancer charity.
Ding Dong Dipshit (Score:5, Interesting)
The best part is, the guy tried to borrow TWELVE MILLION DOLLARS from his neighbor, who then told Our Hero that he was in a scam.
I wish there was a way for this guy to suffer as much as he deserves without also destroying the lives of everybody he's ever met.
Re: (Score:2)
Sadly those ways are banned by the Eighth Amendment.
Re: (Score:2)
I wish there was a way for this guy to suffer as much as he deserves without also destroying the lives of everybody he's ever met.
Assuming of course he hasn't met whomever he was sending the loot.
Where were the controls? (Score:4, Insightful)
Did no one else know about these transfers? What happened to all the checks and balances we keep hearing banks have to prevent drug money coming in and going out, or money laundering as well? Why did this one person have access to do these transfers? Where were the auditors? Where were the regulators?
I can guarantee if I tried to transfer $1.5 million out of my account both the bank and the Feds would be all over me for a week or more trying to figure out what I was doing. Apparently not this guy who tranferred tens of millions out of the bank itself all on his own.
Re:Where were the controls? (Score:5, Informative)
Did no one else know about these transfers?
Several of the employees knew.
But Hanes was the CEO. He decides who gets raises and promotions.
So why would they question his orders? They had nothing to gain by defying him and much to lose.
They could've reported him to the FDIC, but America is not kind to whistleblowers.
So they shut their mouth and kept their head down. It was the prudent thing to do.
Re: (Score:3)
My first girlfriend way way back in 1996 (whom I met on IRC lol) lived in Elkhart, Kansas, and I’ve been there several times.
It had 2,100 people then, just a few streets, really. Now it has 1,800.
I guarantee you that they don’t require the cream of the crop for bank CEOs. I mean, case in point, right?
There’s a Pizza Hut and pretty much nothing else. For miles and miles. Right on the Oklahoma border.
Re: Where were the controls? (Score:3)
Precisely - the scam was the scammers fault, and the stealing was the defendant's fault here... but the fact this escalated to millions of dollars stolen from people's savings? (not accredited investors or even retail investors with their own due diligence and risk expectations)
That is a systems problem.
I hope FDIC makes them whole, but that isn't free to society either. This type of nonsense is why we end up needing "over-regulation" in banking / finance.
Re: (Score:2)
One would hope that at least one of the employees was honest enough to do the right thing, even if the CEO said to do the wrong thing.
Re: (Score:2)
A bank CEO fell for this? (Score:5, Insightful)
Genuinely, I'm of two minds.
1. Do bank CEOs not have to have any intelligence whatsoever? Just tossing money willy nilly at someone saying they're gonna net you returns? That screams scam to me, and I'll certainly never approach bank CEO status. Wouldn't someone in charge of that much money have just a tiny little inkling of "what is this?" going on when this is happening? Especially given the timeline. Like, somewhere between the ten and eleven million dollar mark, wouldn't you think, "Why do I keep handing money to this supposed other person for no actual return?"
2. Was it lost or was it lost? Some of these people play the idiot brigade member publicly while getting by with MASSIVE amounts of fraud intended to line their own pockets with what should be either bank funds, or in this case, bank funds, charity funds, church funds, daughter funds, etc. Did this douchewad just shuffle through crypto to hide his own stealing? This seems the more likely scenario to me based on my gut, which I realize isn't legally binding, but fuck it. If it smells like a duck, quacks like a duck, flies like a duck, and swims like a duck, I suppose we should call it an elephant and ask where its trunk is.
Re:A bank CEO fell for this? (Score:4, Insightful)
> Do bank CEOs not have to have any intelligence whatsoever?
Some. But how stupid they can be will depend on the size of the bank and the institutional checks on stupid decisions.
Once you remove people with serious mental disabilities from the analysis, there generally isn't THAT much difference between someone you'd consider stupid and someone you'd consider smart. You certainly don't have to be any variety of genius to be a CEO.
Re: (Score:3)
> Do bank CEOs not have to have any intelligence whatsoever?
Some. But how stupid they can be will depend on the size of the bank and the institutional checks on stupid decisions.
Once you remove people with serious mental disabilities from the analysis, there generally isn't THAT much difference between someone you'd consider stupid and someone you'd consider smart. You certainly don't have to be any variety of genius to be a CEO.
While the CEOs I've known have ranged from super smart but $personality_disorder to absolute dumbass that somehow fell upward into the job, I'd think in banking situations there would be enough red tape and training to keep them from falling completely off the rails. Clearly, I'd think wrong based on this story, but still.
Hang on, I see the problem. I seemed to have thought the world was logical there for a moment. Let me drink a fifth of whiskey and smoke twelve joints and I'll reassess.
Re: (Score:3)
If the world was logical we wouldn't equate confidence with ability and follow people just because they are entertaining. We'd have no megomaniacx with follows big enough to start wars.
Re: (Score:3)
I'd think in banking situations there would be enough red tape and training to keep them from falling completely off the rails.
Actually, I think the high level of red tape and regulation in the banking industry allowed him to not fail as a banker until the end. Basically, he was limited in his ability to damage the bank until he entirely went off the rails. He very likely could have quickly driven an unregulated business into the ground without those limitations.
Re: (Score:2)
I'd think in banking situations there would be enough red tape and training to keep them from falling completely off the rails.
Actually, I think the high level of red tape and regulation in the banking industry allowed him to not fail as a banker until the end. Basically, he was limited in his ability to damage the bank until he entirely went off the rails. He very likely could have quickly driven an unregulated business into the ground without those limitations.
This tells me I've known a few CEOs that should have gone into banking.
Re: (Score:2)
My experience has been a bit further down the scale - small/medium business. You get some guy who is really motivated, has an idea, and launches an initially successful business... but has absolutely no actual management skills and the more the business grows the more it starts to fall apart.
Stage two is where the first guy starts relying on sales and the business goes into a boom/bust death cycle while the product or service declines, or starts relying on a proper manager who manages the business into med
Re: (Score:2)
> Do bank CEOs not have to have any intelligence whatsoever?
Some. But how stupid they can be will depend on the size of the bank and the institutional checks on stupid decisions.
Once you remove people with serious mental disabilities from the analysis, there generally isn't THAT much difference between someone you'd consider stupid and someone you'd consider smart. You certainly don't have to be any variety of genius to be a CEO.
I think another huge factor is the size of their ego. Those with the biggest egos believe they're infallible and incapable of losing, so they'll fall victim to scams, make bad decisions and generally fuck up. The difference is here, he fucked up so badly he couldn't be insulated from the consequences by his mates at the golf club.
I've met some very high placed individuals in major multi-national corporations at work. They've all been incredibly polite, somber individuals, never presumptuous nor do they l
Re: (Score:2)
Any system where the bank CEO (or someone else) can transfer money with NOBODY else counterchecking it and sanity-checking the transfer, is already fucked. Look what happened with Mattel [smh.com.au] a few years ago when a high muckymuck got his email compromised.
This one is just hitting the news even larger, because the inherent security failure put the money into Crypto, which is always a scam to start with.
Re: (Score:3)
Any system where the bank CEO (or someone else) can transfer money with NOBODY else counterchecking it and sanity-checking the transfer, is already fucked. Look what happened with Mattel [smh.com.au] a few years ago when a high muckymuck got his email compromised.
This one is just hitting the news even larger, because the inherent security failure put the money into Crypto, which is always a scam to start with.
Apparently there were some checks in place here, as it mentions he used other employees to get approvals through, even when he exceeded the daily limits imposed by the bank itself. Which again screams to me, "He was stealing this for himself outright, and using crypto as a shield." Damn it! I have got to stop trying to think of this logically. It's gonna tie my brain into knots.
Re: (Score:2)
Re: (Score:2)
the inherent security failure put the money into Crypto
No money was put into crypto.
The money went to the scammer. There is no reason to believe the scammer bought any crypto with it.
Re: (Score:1)
Re: (Score:2)
A difference being that in this case the CEO would have been willing and able to confirm that he had initiated the transfer. Another difference would have been that in a case like Mattel, the email instructed someone to transfer money.
Re: (Score:2)
If the crypto pig butchering stuff was a ruse, it didn't work.
According to this actuarial table [ssa.gov], the best estimate of a 53 yo man's years remaining years to live is 25.7. He was just sentenced to spend 24 of them in prison.
Re: (Score:2)
Simplest answer is that most do have intelligence, we just found one of the stupider ones. One who was just smart enough to not trip warning flags earlier.
Re: (Score:2)
1. Do bank CEOs not have to have any intelligence whatsoever? Just tossing money willy nilly at someone saying they're gonna net you returns? That screams scam to me, and I'll certainly never approach bank CEO status. Wouldn't someone in charge of that much money have just a tiny little inkling of "what is this?" going on when this is happening? Especially given the timeline. Like, somewhere between the ten and eleven million dollar mark, wouldn't you think, "Why do I keep handing money to this supposed other person for no actual return?"
Especially for smaller banks, it would not be unusual for the CEO to be a midwit. They may be elevated to that role based on their ability to attract new business and maintaining good relations with existing customers, neither of which require a higher than normal level of intelligence. In this case, the CEO was a large shareholder, and he could have inherited those shares versus being successful on his own.
Re: (Score:2)
somewhere between the ten and eleven million dollar mark, wouldn't you think ...
In for a penny, in for a pound.
Once he was in over his head, he had nothing to lose by digging deeper.
He was going to prison anyway, so it made sense to try to "win big", pay back the money he stole, and then cover his tracks.
Re: (Score:3)
I agree. My question is what was the possible scenario of success in this guys mind? What possibly could have occurred in the series of events that would have been unnoticed, or returned dividends exceeding the investment, or absolved him of a 25 year sentence and loss of his family? In what universe does anything this guy did improve ones wealth, health, and security? It makes absolutely no sense that he was motivated by greed and stupidity alone, because there was no possible way he could get away wit
Re: (Score:2)
I agree. My question is what was the possible scenario of success in this guys mind? What possibly could have occurred in the series of events that would have been unnoticed, or returned dividends exceeding the investment, or absolved him of a 25 year sentence and loss of his family? In what universe does anything this guy did improve ones wealth, health, and security? It makes absolutely no sense that he was motivated by greed and stupidity alone, because there was no possible way he could get away with any of it. It seems as though there must be something more to this story that was pushing his buttons. He made several transfers over time, and yet he persisted in just wiring it into the void. He's from Kansas, maybe he bet against the Chiefs and figured that would get him snuffed... I get a feeling that the judge exceeded the prosecutions sentencing recommendations for this very issue: the "truth" doesn't add up and so he might as well get more time for perjury. The truth is the only thing left of any value to the record, and clearly that is incomplete here. The missing co-conspirator must be the deal breaker - the Judge doesn't buy it and is pissed there wasn't a plea bargain.
If you weren't responding directly to me, I'd mod this one up. It's a very sensible take on the sentence.
Re: (Score:2)
Did this douchewad just shuffle through crypto to hide his own stealing?
From the POV of the perp, "stealing", "embezzling", "borrowing" might look a broad spectrum with fuzzy borders. From a legal perspective, there is very little fuzz here; it is a crime to use bank funds for personal enrichment, even if they are being used for "investments" and you so happen to successfully pay the bank back before the shit hits the fan. Save the mitigating arguments for your sentencing hearing.
It is unlikely this fellow was really so foolish as to imagine that money that is just plain gone
Free (as in libre) money seems to have a problem (Score:5, Insightful)
And now, the government is needed to sort out the mess of all the scams, embezzlement, pump-and-dumps, outright theft and Ponzi schemes. Apparently, some governmental oversight is needed.
Re: (Score:2)
Re: (Score:2)
Re: (Score:2)
I wrote it before, but I repeat it again. Crypto currencies started out as a libertarian dream of wealth transfer without governmental control.
And now, the government is needed to sort out the mess of all the scams, embezzlement, pump-and-dumps, outright theft and Ponzi schemes. Apparently, some governmental oversight is needed.
It started out as a distributed computing problem solved with cryptography.
Libertarians' couldn't care less if this was crypto-currency or precious medals or any other form of value storing.
greed + FOMO (Score:5, Informative)
Crypto is the perfect embodiment of Greed + FOMO.
Re: (Score:2)
Surely the answer is simply to legislate that "all cryptocurrency is deemed to be counterfeit money" and therefore every cryptocurrency is now banned.
Re: (Score:2)
I think maybe it just needs to be reframed. We need to stop calling it money, stop calling it a replacement for the financial system, it is not those things. Crypto is more like a collectible, like beanie babies or baseball cards. I have no issue with someone making a product and selling it. There are tons of shitcoins and you can collect them all. But understand that you have a collection of entries in databases that may or may not be of value now or in the future, its cool to enjoy collecting and to enjoy
Headlines (Score:2, Informative)
Ugh, I HATE the headline - the crypto scam didn't wreck the bank, the FUCKING CEO did. The fact that he did it because he got conned by a crypto scam is only a little relevant - could just as easily have been him gambling at a race track.
Unfair sentence (Score:3, Interesting)
Re: (Score:3)
This guy dead
Re: (Score:2)
Re: (Score:2)
It’s unreasonable because it’s much higher than the Kansas guidelines for 2nd degree murder (147 months): https://www.sedgwickcounty.org... [sedgwickcounty.org]
I think a more meaningful sentence would be 7-10 years.
Re: (Score:2)
In this case though he didn't get this long of a sentence for one charge; this was multiple crimes each with their own charge and own sentence. The 24 years is literally just the aggregate of the sentence for each charge.
Now that the judgment has been passed down the lawyers begin the negotiation. While what this guy did was heinous he won't serve these sentences consecutively but more likely some mix of serving his sentences simultaneously with some additions for the number of crimes and some "no early rel
Re: (Score:2)
>Remember that FDIC make protect the banks clients, but that money comes from our taxes.
The FDIC receives no taxpayer money. They self-fund, through premiums paid by the member banks that are invested.
https://www.brookings.edu/arti... [brookings.edu]
Re: (Score:2)
Traditionally, the US is extremely lenient for corporate crime. Those people usually just get fines -- actual prison time is for the plebs.
This guy wasn't just gullible, he was playing with other peoples' money in ways that he knew he shouldn't. Banks are a regulated industry, and there are some things that are, you know, kind of illegal.
Re: (Score:2)
No, not gullible. A greedy thief. He *knew* he had no right to take millions of dollars from the bank and its customers, but he did it anyway. That's not the actions of a gullible idiot, that's the actions of a brazen thief.
Re: (Score:2)
The guy's a terrible guillable person indeed, but the sentence is absolutely unreasomable. The more inread about the absurd us sentence lenghts for crimes the more i'm happy i don't live
The extremity of the penalty is not due to the crime, it is due to the extremity of the effects on other people. In other words: punishment. A spanking would be enough to teach him not to do such things. The people he hurt, were hurt MUCH more than a mere spanking... and the penalty matches that.
Is it 'right'? In this case, I don't particularly care; however, it is fight worth pursuing.
Just another reminder (Score:2)
multiple banks failed? (Score:1)
Is that laughter I hear? (Score:1)
.. echoing across Pyongyang?
Re: (Score:2)
No, I believe the cows may have come home in India somewhere though. That should make up for the cow and unborn calf they killed a few weeks ago in Sweden. Karma.
What an imbecile (Score:2)
What an imbecile, a gold-standard imbecile.
How did ever achieve a position with this much responsibility? Was it by chance? Connections? Attrition?
Whatever it was I doubt it was his skill and financial acumen.
Re: (Score:2)
It’s a town of 1,800, losing about 2% of the population every year.
There were so few options, he may be the only possible candidate in the entire pool of potential people.
Meanwhile, at Zelle... (Score:2)
The smartest guys in the room (Score:2)
The reality is that the professional-managerial class and the financial class are most often inept and dominate through corruption, influence and government capture.
Interesting Scam (Score:2)
Hope he enjoys prison, he deserves it. Someone with that much responsibility should be smarter than this.
This pig-butchering stuff is really fascinating, though. It preys deeply on the sunk cost fallacy. If you don't know what it is, check it out some of Pleasant Green's videos on YouTube, it's interesting to see how they get you hooked: https://www.youtube.com/watch?... [youtube.com]
Once you lose a few thousand to this kind of scam, you're constantly trying to get your money back by giving them more money... repeating t