ELKHART, Kan.–A “pig-butchering” crypto scam that involved the theft of more than $47 million and which allegedly targeted and involved the bank’s former CEO is being blamed for the 2023 shutdown of that bank, according to a new report.
The U.S. Attorney’s Office said Shan Hanes, the former CEO of Heartland Tri-State Bank, orchestrated a sophisticated fraud that led to the embezzlement of $47.1 million.
At the center of the alleged scam was a so-called pig-butchering technique, a reference to the practice of fattening a hog before slaughter. Hanes has been formally charged with one count of bank embezzlement and is facing a maximum sentence of 30 years in prison.
A local investment club and a church were also defrauded as part of the scheme, according to authorities.
According to the U.S. Attorney, Hanes is accused of defrauding the bank through a series of wire transfers “to purchase cryptocurrency for his own benefit” between May 2023 and July 2023.”
The former CEO was purportedly the target of a “pig butchering” scam, defined by FinCEN in this case as a scheme wherein “victims invest in supposedly legitimate virtual currency investment opportunities before they are conned out of their money.”
‘Fattening Up the Victim’
“Scammers refer to victims as ‘pigs,’ and may use fictitious identities, the guise of potential relationships, and elaborate storylines to ‘fatten up’ the victim into believing they are in trusted partnerships before they defraud the victims of their assets—the ‘butchering,’” FinCEN said in a statement.
Specifics related to the scam in which Hanes was involved have yet to be provided by authorities. Hanes was arrested after a new regulatory review revealed that Hanes “executed small cryptocurrency transactions through another bank as early as January 2023” involving “personal funds and funds potentially belonging to other entities.”
Investigators said when Hanes was asked to provide explanations for the series of wire transfers made between May and June of 2023, they found his answers to be “unreliable and inaccurate” as they “did not make sense and were difficult to follow.”
‘Increasing Amounts’
The U.S. Attorney’s Office said that upon review, investigators concluded that Hanes’ “transactions to cryptocurrency exchanges that are of increasing amounts over time appear to be consistent with the progression of a pig butchering scam.”
The review further found that Heartland Tri-State Bank took $21 million from the Federal Home Loan Bank System before the bank collapsed in July of 2023. All deposit accounts have been transferred to Dream First Bank in Syracuse, Kan.
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