After Kansas bank collapsed, former CEO admits to embezzling $47 million for crypto scheme

The former executive of a rural Kansas bank that collapsed last summer has admitted to a embezzling tens of millions of dollars for a cryptocurrency scheme.

Shan Hanes, 52, of Elkhart, pleaded guilty Thursday in U.S. District Court to one count of embezzlement by a bank officer. Sentencing is scheduled for Aug. 8, with a maximum of 30 years in prison, maximum fine of $1 million and up to $60.5 million in restitution.

Hanes previously was the CEO of Heartland Tri-State Bank in Elkhart in southwest Kansas.

"Shan Hanes is a liar and a master manipulator who caused Heartland Tri-State Bank to collapse," U.S. Attorney Kate E. Brubacher said in a statement. "Even as he was squandering away tens of millions of dollars in cryptocurrency, Hanes orchestrated schemes to cover his tracks concerning the losses at the bank. Many victims will never fully recoup losses to their life savings and retirement funds, but at least we at the Department of Justice can see that Hanes is held criminally responsible for his actions."

Kansas bank regulators deemed Heartland insolvent in July. 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 followed some high-profile national bank failures.

The bank was insured by the Federal Deposit Insurance Corporation. The FDIC assumed the bank's assets, and it was acquired by a Syracuse bank.

Hanes was criminally charged in February. As part of a plea deal, Hanes admitted to embezzling bank funds, causing the bank to fail and losing the equity of bank investors.

The plea agreement states that Hanes communicated with an unidentified co-conspirator through WhatsApp about investing in cryptocurrency. Hanes took money from multiple accounts — including from a local church — and initiated a series of wire transfers totaling $47.1 million stolen from the bank and sent to a cryptocurrency wallet.

During that time, Hanes lied to bank employees, the board of directors and investors about the purpose of the wire transfers. Meanwhile, the funds were then transferred to other cryptocurrency accounts controlled by other, unidentified people. Bank shareholders lost between $9.3 million and $13.4 million.

Federal Reserve investigators said Hanes fell for what's known as a "pig butchering" cryptocurrency scam, where scammers steal money by convincing someone — the "pig" — to send funds for what they think is a legitimate investment. They may also get more money by promising larger returns on continued fake investments. The term is derived from fattening up pigs before slaughter.

Court documents signed by Hanes said "I am 'GUILTY'" and "I hope to receive leniency, but I am prepared to accept any punishment permitted by law which the Court sees fit to impose."

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.