White-Collar Fraud
FBI recovers $8 million swindled from failed bank’s small-town investors
When the CEO of a Kansas bank pleaded guilty last year to embezzling customer funds in a $47 million cryptocurrency scheme, it appeared justice was served. The bank officer, Shan Hanes, was sentenced to 24 years in prison—the longest-ever federal sentence in the state for a white-collar crime. And the bank’s customers got their money back since the deposits were federally insured.
Left holding the bag, however, were about 30 local shareholders who owned Heartland Tri-State Bank through a holding company in Elkhart, Kansas.
The bank's failure cost them more than $8.2 million—a figure amounting to generations of accumulated wealth for farmers, teachers, and others in and around the rural town of around 2,000 people.
"When the bank failed, the value of their stock went to zero because it had only one asset—and that was Heartland Tri-State Bank," said Special Agent Sage Hemmert, who led the FBI's investigation from the Bureau’s Garden City office, a satellite office of the Kansas City Division.
"These were not Silicon Valley investors," Hemmert said. "These were regular people from southwest Kansas. And a lot of them had their net worth tied up in this bank."
So, it was quite the surprise last November when the bank's shareholders learned the FBI had recovered nearly all of their money.
How the Bureau traced crypto breadcrumbs to one of the scammers' digital wallets and seized more than $8 million illustrates both the complexities of investigating digital currencies and how the FBI is always evolving to protect against emerging scams.
"These were regular people from southwest Kansas. And a lot of them had their net worth tied up in this bank."
Sage Hemmert, special agent, FBI Kansas City
In this case, the bank's CEO, Shan Hanes, was duped in a cryptocurrency fraud scam in which online perpetrators convinced him to invest in a cryptocurrency scheme that promised big returns.
Victims in this type of fraud are encouraged to put more and more money into what appears to be a highly profitable investment platform, only to discover too late that they can't withdraw their funds. The scam is commonly known as pig-butchering—a name analogous to fattening a pig for slaughter.
Hanes started slow, investing a few thousand dollars in 2022 to buy what he thought was cryptocurrency. A year later, he wired more than $47 million from customer accounts to the scammers, depleting the bank's holdings. When a state banking regulator uncovered the fraud, it closed the bank and called the FBI.
"I've worked white-collar cases before, but I've never worked one with this amount of loss or with this many victims significantly affected," Special Agent Hemmert said.
Working with inspectors general from the Federal Deposit Insurance Corporation (FDIC) the Federal Reserve Board, and the Federal Housing Finance Agency, Hemmert and a team of investigators from the Kansas City Division set about interviewing victims and following the money. The division's Complex Financial Crime Squad and Cyber Crimes Task Force quickly traced the flow of scammed funds to an offshore digital wallet, or crypto account, containing more than $8 million. The FBI seized the funds.
"We were able to get a significant portion of the funds back for the individuals," said Reed Ptomey, a forensic accountant in the Kansas City Field Office. "With cryptocurrency, that doesn't happen all the time."
"To be able to give them back their money is extremely powerful."
Emilee Thompson, forfeiture specialist, FBI Kansas City
Indeed, it's rare for fraud victims to recover their lost money, especially when scammers use cash or cryptocurrency, which can be hard to trace since the money can change hands quickly.
In 2023, the Bureau’s Internet Crime Complaint Center (IC3) received more than 69,000 complaints from the public regarding financial fraud involving the use of cryptocurrency. Estimated losses with a nexus to cryptocurrency totaled more than $5.6 billion. Investigators in the Kansas case were heartened when a federal judge last November informed the failed bank’s owners that all was not lost.
"To be able to give them back their money is extremely powerful," said Emilee Thompson, a forfeiture specialist for FBI Kansas City.
The courtroom erupted when the judge told victims at a November 4 restitution hearing in Wichita that the FBI recovered most of their money.
"There was cheering and clapping and crying because these people went from thinking they had lost $8.2 million to being made aware they were going to be made very near whole," Special Agent Hemmert said.
He said it was particularly impactful to help folks in rural Southwest Kansas, whose opinions of the FBI vary widely.
"To live up to the reputation of the FBI and to show that we will do whatever we can—move heaven and earth if necessary—to do what we can to get their money back, that was cool," he said. "To show these people and Elkhart that the FBI cares a great deal about victims and to do whatever we can to make them whole after they’ve been the victim of a crime.”
"To live up to the reputation of the FBI and to show that we will do whatever we can—move heaven and earth if necessary—to do what we can to get their money back, that was cool."
Sage Hemmert, special agent, FBI Kansas City
