Convicted former Heartland Tri-State Bank CEO Shan Hanes is seeking a reduced sentence after pleading guilty in May to embezzling $47.1 million from the Elkhart, Kan.-based bank in the weeks leading up to its July 2023 collapse.
Federal guidelines call for Hanes to receive a sentence of between 19 1/2 and 24 1/2 years in prison, according to a sentencing memorandum Hanes filed Aug. 7 in the U.S. District Court for the District of Kansas. Hanes is instead either seeking a downward variance or the low end of the guidelines.
According to the plea agreement, Hanes fell victim to a crypto “pig butchering” scheme in which the impression is created that more transfers are needed to unfreeze previously deposited funds.
Hanes started discussing investing in cryptocurrency with an unidentified third party in late 2022 via the electronic messaging platform WhatsApp. Hanes allegedly embezzled $30,000 from a local church in January 2023, which was deposited into his personal account at a second bank and used to make crypto investments the following month. Hanes allegedly embezzled an additional $10,000 from the church in April 2023, along with another $10,000 from a New Mexico-based investment club.
Hanes reportedly embezzled $47.1 million from Heartland Tri-State Bank through 11 wire transfers ranging from $5,000 to $10.3 million from May 30-July 7, 2023. He reportedly directed bank employees to transfer the money and lied to them and the bank board about the purpose of the transfers. Hanes’ investments later flopped, and he unsuccessfully tried to secure a $69 million loan from another bank.
Heartland Tri-State Bank failed on July 28, 2023. Kansas State Bank Commissioner David Herndon declared Heartland Tri-State Bank insolvent in late July 2023. Heartland Tri-State’s four branches reopened three days later as locations of Syracuse, Kan.-based Dream First Bank.
“Hanes made some very bad choices after being caught up in an extremely well-run cryptocurrency scam,” said Hanes’ lawyer, John E. Stang. “He was the pig that was butchered. He has no prior criminal history, and up until this point has been a well-respected person in the community.”
Hanes said he has accepted responsibility for his actions, complied with the investigation and would be able to pay restitution faster if he served a shorter sentence. He also cited personal and professional accomplishments. Hired by Heartland Tri-State Bank as an ag loan officer in 1993, Hanes was named president/CEO in 2008. Three years later, he brought a local investment group together to acquire the bank from its former holding company. Hanes chaired the Kansas Bankers Association in 2022 and served on the American Bankers Association’s Ag and Rural Banker Committee from 2015-19.
“These people were his friends, coworkers and neighbors, and all that he can do at this point is try to pay back the restitution upon his release from prison,” Stang said of Heartland Tri-State investors.
Stang also cited positive pre-sentencing comments from bank shareholders. “While most request a long sentence, the majority agree that Hanes is one of the smartest people they had ever met, had helped them in the past, and would never have expected him to take money from the bank,” he wrote.
Sentencing is scheduled for Aug. 19, according to American Banker.
Hanes, who allegedly lost $1.15 million in his own money from the scam, also faces a 28-count complaint in Morton County, Kan., based on the same allegations. The County Attorney’s Office is recommending that Hanes, who faces a potential sentence of more than seven years in the state case, serve the sentences consecutively. In the state case, Hanes has a Sept. 9 pre-trial conference and an Oct. 21 jury trial.