Industry bars entry for the failed Kansas bank CEO, as per decision by the Fed.
In a significant turn of events, the collapse of Heartland Tri-State Bank in Kansas has been linked to a large-scale cryptocurrency scam, known as the "pig butchering" scheme. The scheme, which involved fraudulent crypto investment operations, led to severe financial damage, including the failure of the bank.
According to reports, the bank's CEO, Shan Hanes, was at the heart of the scam. Between May and July 2023, Hanes made 10 wire transfers totalling $47.1 million from the bank's funds to his personal crypto wallet and third-party crypto accounts[1].
Hanes was charged in February and pleaded guilty in May. The sentence handed down to him in August was the maximum under the guidelines for one count of embezzlement as a bank officer - 24 years in prison[1].
The "pig butchering" scheme earned its name from the way victims were "fattened up" with promises of large returns before being defrauded. The failure of Heartland Tri-State Bank was the most significant fallout, with Hanes' actions betraying the bank, its investors, and potentially jeopardizing confidence in financial institutions[1].
The Department of Justice (DOJ) seized $225 million in USDT (Tether) linked to the scam, highlighting the extensive harm caused by these fraudulent activities[1]. The DOJ's seizure aims to recover funds and underscores the destructive impact of such crypto scams on financial institutions and investors.
In an August statement, Kate E. Brubacher, U.S. Attorney for the District of Kansas, said, "Hanes' actions trespassed professional obligations, personal relationships, and federal law."
Following the bank's failure, the Federal Deposit Insurance Corp. took over Heartland Tri-State Bank in July 2023 and sold it to Dream First Bank. And in a move to prevent such incidents in the future, the Federal Reserve banned Hanes from the banking industry[1].
The loss of $9 million for bank investors due to the bank's failure is a stark reminder of the potential consequences of such scams. Hanes has agreed to pay restitution up to $60.5 million[1].
[1] Gabrielle Saulsbery, "Former Kansas Bank CEO Sentenced to 24 Years for Cryptocurrency Embezzlement," The Wall Street Journal, Aug. 21, 2024.
The collapse of Heartland Tri-State Bank in Kansas, linked to the "pig butchering" crypto scam, not only resulted in severe financial damage but also affected the bank's business and general-news landscapes. In August, the bank's CEO, Shan Hanes, was sentenced to 24 years in prison for embezzlement, with his actions causing the bank's failure, betraying investors, and potentially damaging public trust in financial institutions.
