Kansas-based Heartland Tri-State Bank’s former CEO, Shan Hanes, has pled guilty to embezzling $47.1 million, which he used for personal cryptocurrency purchases. This financial misconduct led to the bank’s collapse in July 2023, resulting in a complete loss of equity for investors, as noted by the U.S. Attorney’s Office for the District of Kansas.
Hanes, 52, orchestrated a series of crypto schemes to cover the bank’s losses, ultimately squandering tens of millions of dollars. Attorney Kate Brubacher described Hanes as a “liar and a master manipulator” whose actions caused the bank’s downfall. “Many victims will never fully recoup losses to their life savings and retirement funds. But at least, we at the Department of Justice can see that Hanes is held criminally responsible for his actions,” Brubacher stated.
The Federal Bureau of Investigation (FBI), Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, and Federal Housing Finance Agency are currently investigating the case. Hanes faces a maximum of 30 years in prison, with sentencing set for August 8.
The collapse of Heartland Tri-State Bank is part of a broader trend involving banks with significant exposure to cryptocurrency. Other banks, such as Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank, also provided banking services to cryptocurrency firms, including holding deposits and making loans. These failures have amplified the debate over the appropriate relationship between traditional banks and the crypto ecosystem.
In February 2023, the Federal Reserve issued a joint statement highlighting the liquidity risks associated with banks serving crypto organizations. The Fed urged banking organizations to apply existing risk management principles to manage these risks effectively.
