Former Heartland Tri-State Bank CEO Shan Hanes pleaded guilty this week to embezzling $47.1 million from the bank in the weeks leading up to its collapse last summer.
Hanes, 52, pleaded guilty on May 23 to embezzling the funds from the $139 million, Elkhart, Kan.-based bank through illicit wire transfers to multiple cryptocurrency accounts controlled by third parties from May 30-July 7, 2023.
Hanes will be required to pay back at least $47.1 million to the FDIC as receiver for Heartland-Tri State Bank and between $9.27 million and $13.43 million to shareholders of Heartland’s holding company Elkhart Financial Corp. Hanes faces a maximum sentence of 30 years in prison and a $1 million fine. The plea agreement did not include an expected sentence.
According to the agreement, 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.
Wire transfers from Heartland Tri-State Bank included:
- $5,000 on May 17
- $3 million through two $1.5 million transfers on May 30-31
- $3.5 million and $3.2 million on June 2
- $10 million on June 14
- $1.4 million on June 20
- $10.3 million on June 23
- $3.3 million on June 27
- $8 million on July 5.
- $4.4 million on July 7
Bank funds were to be transferred to a cryptocurrency exchange before being deposited into Hanes’ account at a separate crypto exchange, according to the complaint.
“Throughout the series of wire transfers, [Hanes] and [an unidentified co-conspirator] are maintaining communications through WhatsApp,” the complaint states. “The scheme and justification for the continued transfers is the impression that more funds are constantly needed to ‘unfreeze’ the previously deposited funds. This cycle continues throughout the scheme.”
Hanes 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.
Kansas State Bank Commissioner David Herndon declared Heartland Tri-State Bank insolvent in late July 2023. The FDIC later estimated the bailout cost its Deposit Insurance Fund $54.2 million. Heartland Tri-State’s four branches reopened three days later as locations of Syracuse, Kan.-based Dream First Bank.
The investigation was conducted by the FBI and agents of the Office of the Inspector General for the FDIC, Federal Reserve Bank and Federal Housing Finance Agency.
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.
