Ex-Bank CEO Pleads Guilty to $47 M Embezzlement in Crypto Scheme
According to a press release from the US Attorney’s Office in Kansas dated August 19, Hanes pleaded guilty to embezzling a staggering $47 million in a “pig-butchering” crypto scam that ultimately led to the bank’s downfall.
Between May and July 2023, Hanes, leveraging his position of trust, executed a series of 12 covert wire transfers, siphoning off millions from the bank’s coffers to a cryptocurrency wallet linked to the fraudulent scheme.
The Federal Deposit Insurance Corporation, which insured the bank, was left to foot the massive $47.1 million bill.
The consequences of Hanes’ actions were devastating: the bank’s collapse wiped out the entire equity of its investors, leaving them with significant financial losses.
The former CEO’s guilt was formally acknowledged on May 23, when he admitted to one count of embezzlement by a bank officer, a crime punishable by up to 30 years in prison.
Crypto Scheme Leads to Bank Collapse, CEO Faces Jail Time
US Attorney Kate E. Brubacher commented that Hanes “breached his professional duties,” emphasizing that the sentencing delivers “a measure of justice for the victims and a declaration that the U.S. Department of Justice is committed to holding accountable those who misuse positions of trust for personal benefit.”
The case of Hanes underscores the vulnerabilities within the cryptocurrency sector, where the semi-anonymous characteristics of blockchain technology are attractive to individuals seeking swift and sometimes unlawful profits.
This sentencing comes in the wake of another high-profile case involving Reginald Fowler, a former co-owner of the Minnesota Vikings.
Fowler was sentenced to six years in prison for operating a “shadow bank” catering to the crypto industry. In 2018, the bank facilitated over $700 million in unregulated transactions.
Special Agent in Charge Stephen Cyrus of the FBI’s Kansas City Field Office remarked in a statement that Hanes’ attempt to rapidly accumulate wealth through what turned out to be a
pig butchering scheme led to the bank’s demise.
Cyrus emphasized that Hanes, together with the bank, had a duty to safeguard customers and detect fraudulent schemes rather than participate in them.
From Using Personal Finances to Bank Funds
Court filings from earlier this year reveal that while Shan Hanes’ initial foray into cryptocurrency in December 2022 was funded with his personal finances, his subsequent purchases in early 2023 involved embezzling funds from a local church and an investment club.
The term “pig butchering” describes a sophisticated form of financial fraud where scammers build trust with their victims over time, similar to a farmer fattening a pig before slaughter. This type of scam often involves coaxing victims into investing in non-existent or fraudulent schemes, frequently utilizing cryptocurrencies.
