ELKHART — Eight months after a bank failure shook this historic and close-knit community, new details are emerging that indicate just how deeply the bank’s collapse was felt in town.
It’s a story about the theft of $47 million, which authorities allege the bank’s CEO used to cover his losses in an online cryptocurrency scam, but ultimately it’s a tale about trust and money and what happens when an institution that most of us take for granted collapses.
“People need to know what occurred,” Brian Mitchell, a third-generation resident and one of the targets of the scheme, told me. “There was a turning point when the victim became the thief.”
Shan Hanes, the CEO of Heartland Tri-State Bank, is charged in federal district court with embezzling $47.1 million between May and July of last year to purchase cryptocurrency. If convicted, he could be sentenced to the maximum penalty of up to 30 years in prison.
Hanes, 52, also faces 29 felony counts in Morton County District Court in connection with the same scheme, for acts officials say he committed between January and July 2023. The state charges, outlined in an amended complaint filed last week, range from the misappropriation of millions from the bank to taking $20,000 from an investment club he had with long-time friends to stealing $40,000 from his own church. He’s also charged with unlawful acts involving a computer and to making false statements about the bank’s amount of liability coverage to gain access to more funds.
“It was definitely a devasting thing to the community,” said county prosecutor David A. Thompson. “I think it was a scheme. It seems to meet the criteria for pig butchering.”
Pig butchering is a vicious online scam. The “pigs” to be butchered are victims lured into investing in virtual or foreign currencies by scammers using fake identities with elaborate storylines to gain trust and fatten the stakes. These schemes are often run from Southeast Asia by organized crime gangs that exploit the victims of human trafficking, according to an alert from the federal Financial Crimes Enforcement Network.
There was a turning point when the victim became the thief. … He went through his own savings accounts, he went through his kids’ college funds and then … well, then he turned and started stealing money. Brian Mitchell, a long-time acquaintance of
banker Shan Hanes
Hanes, through his attorney, declined a request for an interview. The attorney, John Stang of Wichita, also chose not to comment. Hanes was released from custody on $25,000 bond on the federal case, and $50,000 bond for the Morton County charges, but he is confined to house arrest through an electronically monitored ankle bracelet.
Hanes pleaded not guilty Feb. 28 during arraignment on the federal charge.
The federal charge consists of one count of embezzlement by a bank officer. If convicted, in addition to the prison time, Hanes could also be hit with a monetary judgement equal to the amount of the alleged embezzlement. A spokesperson for the U.S. Attorney’s Office in Wichita declined to comment on the case, but it appears any hope of recovering the money is slim, as federal judgments do not extend to organized crime rings in Southeast Asia.
Thompson, the Morton County attorney, said he’s not seeking to recover any money in the state case. The charges are based on an investigation by the local sheriff’s office, he said. Thompson is the interim county attorney and has a private law practice in Creede, Colorado, about six hours away by car. The office of Morton County attorney is up for election in November, but so far no candidates have filed for the post, according to the county clerk’s office.
These are really nice people who have been wronged.Brian Mitchell
A February 7 report from the Office of the Inspector General of the Federal Reserve found the Heartland Bank failed because of a “pig butchering” scheme that entangled Hanes, who used his considerable influence at the bank and in the community to get by for months with illegal wire transfers and other allegedly criminal activity.
“Significant internal control breakdowns and the influence of the CEO as a dominant management official created an opportunity for the series of apparently fraudulent wire transfers to be initiated and processed,” the report reads. “These wire transfers significantly impaired Heartland’s capital and liquidity, causing the bank to become insolvent.”
Hanes had previously held offices in state and national trade associations, the report said, and was described as “an important figure in Elkhart who held leadership roles in local organizations.” He apparently began trading cryptocurrencies with his own funds, then dipped into other accounts — the church and the investment club — and finally is accused of embezzling from the bank. The trust that bank employees had in Hanes caused them to circumvent, under his direction, wire policy and limits, the report said.
