Former CEO of Kansas Bank Accused of Using Bank’s Funds for Cryptocurrency Purchases
The former CEO of a Kansas bank that failed last year, Shan Hanes, is facing charges for allegedly using the bank’s funds to make cryptocurrency purchases. The State Bank Commissioner of Kansas had announced the insolvency of Heartland Tri-State Bank last summer, leading to its acquisition by Dream First Bank. The Federal Deposit Insurance Corporation stepped in to secure the bank’s assets and ensure customers could still access their money.
Heartland Tri-State Bank’s failure came in the wake of the collapses of Silicon Valley Bank and First Republic Bank, but regulators stated that it did not raise concerns for the overall banking industry in Kansas. However, new details have emerged from court documents, revealing that the bank was scammed.
According to the Office of the Inspector General, Hanes transferred a staggering $47.1 million from the bank between May 30 and July 7 for cryptocurrency purchases. He fell victim to a “pig butchering” scam, in which scammers entice victims to invest in supposedly legitimate cryptocurrencies and then make off with their money. The term “pig butchering” refers to the fattening up of pigs before they are slaughtered.
Hanes initially used small amounts from his personal accounts before resorting to using the bank’s funds for more substantial investments. Additionally, he also took money from a local church and an investment club to finance the scheme.
As a result of these findings, the OIG has recommended increasing awareness about cryptocurrency scams among bankers. They also suggested implementing in-house policies, such as requiring approval from the bank’s board for large transfers, as a preventive measure against bank failures.
Hanes is now facing charges of embezzlement by a bank officer, a crime that could result in a maximum sentence of 30 years in prison, along with the forfeiture of any property connected to the embezzlement. His initial court appearance is scheduled for February 28 in the U.S. District Court in Wichita.
Analyst comment
Negative news. The former CEO of a failed Kansas bank used the bank’s funds for cryptocurrency purchases and fell victim to a scam. The market is likely to be negatively impacted, with increased scrutiny on cryptocurrency investments and the need for stricter regulations to prevent bank failures.
