June 15, 2024

ELKHART — As fresh details around the failure of a local bank that rocked this tight-knit, historic community eight months ago become available, it’s clear that the impact of its collapse was profoundly felt across town.

The story, at its core, is not just about the alleged larceny of $47 million by the bank’s CEO to cover his losses in an online cryptocurrency fraud, but more importantly, it underscores the themes of trust and financial security and the social turmoil that ensues when such an institution, usually taken for granted, falls apart.

“We must understand what truly transpired,” emphasized Brian Mitchell, a third-generation inhabitant and a victim of the plot. “There was a major reversal when the prey turned predator.”

Shan Hanes, the CEO at the helm of Heartland Tri-State Bank, has been indicted in a federal district court for misappropriating $47.1 million for the acquisition of cryptocurrency from May to July in the previous year. Consequentially, he could potentially face a maximum jail sentence of up to 30 years if found guilty.

Simultaneously, at the age of 52, Hanes is facing 29 felony allegations in the Morton County District Court, connected to the very same deception. According to the accusations, he committed these acts between January and July 2023. The state charges, clarified in a revised complaint submitted last week, vary from deviating millions from the bank, swindling $20,000 from an investment group he shared with long-standing friends, to pilfering $40,000 from his own religious institution. He is also being held accountable for engaging in illegitimate activities involving computing systems and fabricating false affirmations regarding the bank’s extent of liability insurance to secure further capital.

“It absolutely wreaked havoc on the community,” bemoaned county prosecutor David A. Thompson. “It essentially was a calculated conspiracy. It coincides with the pig butchering criterion.”

Pig butchering, as previously mentioned in my September piece, is a pernicious internet sham. The so-called “pigs” on the chopping block are unfortunately unwitting victims lured into splurging on virtual or foreign currencies by swindlers using fabricated identities and intricately woven narratives to gain trust and inflate the amounts at stake. Such plots are regularly orchestrated by organized crime syndicates in Southeast Asia that exploit human trafficking victims, as pointed out in an alert issued by the federal Financial Crimes Enforcement Network.

Through his legal representative, Hanes turned down an interview request. His attorney, John Stang from Wichita, opted to refrain from making any comments. Currently out on bail of $25,000 and $50,000, for the federal and Morton County charges respectively, Hanes is under house arrest with an electronic monitoring device strapped around his ankle.

Hanes entered a not guilty plea on Feb. 28 at the arraignment for the federal charge.

The sole federal charge is embezzlement by a banking officer. If proven guilty, in addition to imprisonment, Hanes could be served with a financial penalty equivalent to the speculated amount of the felony. A spokesperson for the U.S. Attorney’s Office in Wichita has opted to stay tight-lipped on the matter, but it seems like any prospects of retrieving the stolen money is a long shot due to federal judgments not applying to organized criminal groups rooted in Southeast Asia.

Local attorney Thompson stated that he does not intend to seek any restitution in the state case. The charges are founded on an inquiry by the local sheriff’s department, he clarified. As the acting county attorney and operator of a private law firm based in Creede, Colorado, a six-hour drive away, he has his hands full. As of yet, no candidates have put forward their nominations for the post of Morton County attorney in the impending November elections, as informed by the office of the county clerk.

![Heartland Tri-State Bank of Elkhart](https://investmentshoax.com/wp-content/uploads/2024/04/bankfail.jpg)

Heartland Tri-State Bank of Elkhart sank in July, having succumbed to a “massive scam,” as labelled by a state regulator. The FDIC orchestrated a deal with Dream First for the ill-fated bank, a snapshot of which was taken in September 2023. (Photograph by Max McCoy/Kansas Reflector)

The bankruptcy of Heartland Bank was attributed to a “pig butchering” con that ensnared Hanes, who exploited his considerable sway within the bank and the larger community to propel his illegal wire transfers and other purported criminal undertakings over many months, according to a February 7 document from the Federal Reserve’s Office of the Inspector General. This report stated, “Internal control shortcomings of significance combined with the CEO’s imposing presence as a dominant administrative official facilitated the initiation and processing of a series of seemingly fraudulent wire transfers. These transfers substantially depleted Heartland’s capital and liquidity, sending it spiraling into insolvency.”

The report indicates that Hanes held important positions within state and national trade bodies and was widely recognized as “a dominant figure in Elkhart, with leadership roles in local bodies.” He initially began cryptocurrency trade with his personal savings, before eventually resorting to draining other accounts — his church and the investment club — and is now accused of siphoning off funds from the bank. The trust placed in Hanes by bank employees inadvertently led them to neglect relevant wire policies and limits under his directive.

Heartland allowed a transaction limit of $5 million and $3 million per wire transfer before and after June 2023, respectively. However, certain transfers to apparent cryptocurrency accounts significantly exceeded these limits by numerous millions. Two transfers that took place on June 14 and June 23 were of the amounts of $10 million each.

On July 5, Hanes requested a meeting with Brian Mitchell at the bank.

Given its location in the proximity of the town’s sizable grain elevator, it was fitting that the bank’s primary source of business was agriculture. Hanes, one of the bank’s most prominent shareholders, had led a consortium of investors in 2011 for the acquisition of the National Bank of Elkhart.

Mitchell identifies as a “third-generation southwest Kansas dirt farmer” with an inordinate passion for cinema, as he candidly revealed in his testimony in front of a Kansas Senate committee. His family owns a chain of 15 cinemas across seven states, including the recently refurbished Doric Theatre in the heart of Elkhart, which dates back to 1918.

Mitchell has been acquainted with Hanes since the 90s. As Mitchell recalls, Hanes was actively involved within the local community, serving on the school board among other societal groups. The two of them were members of the Santa Fe Trail Investment Club, a small group that had been operative for multiple decades. However, when they met in Hanes’s office that morning, something felt amiss.

The interaction felt unnatural, recounts Mitchell. “His attention kept drifting. He would focus momentarily, then his gaze would wander off to the lobby, then he would fix his gaze back at me.”

As per Mitchell, during this meeting, Hanes solicited a sum of $12 million.

Relating his response, Mitchell said, “He expressed an issue with a wire transfer from a bank based in Hong Kong. He presented an app on his phone which displayed a balance of around 40 million in his account, yet he needed an additional $12 million to access it.”

Mitchell, a one-time certified public accountant, flatly refused.

“I insisted that he might be entangled in a scam,” he declared.

Mitchell suggests that Hanes might have authorized an $8 million wire transfer from the bank’s funds on that very day, aligning with a chronology in the report.

The organization’s financial officer reported suspicious activities to regulators on 21st July. By 28th July, Heartland reported a deficit of $35 million, the Kansas State Bank Commissioner intervened, shut down Heartland, and designated the FDIC as custodian. The failure in finances was estimated to be around $54 million, which was all covered by the FDIC. Finally, Dream First Bank of Syracuse, Kansas acquired Heartland. It was among the five nationwide bank failures of that year.

![Image](https://investmentshoax.com/wp-content/uploads/2024/04/Elkhart-tracks-300×200.jpg) – *Railroad tracks leading into the distant horizon northeast of Elkhart in far southwestern Kansas (Image by Max McCoy/Kansas Reflector)*

“What essentially happened in January 2023 was that Shan started dabbling in cryptocurrency trading,” explained Mitchell. “He depleted his personal savings accounts, his kids’ college funds, and as things worsened he eventually began embezzling funds”.

Among the entities he allegedly embezzled from was the Church of Christ in Elkhart. Hanes was an active member and occasionally officiated funerals. The church was eventually closed, not due to fund shortage, as a third party managed to cover the shortfall, but the corruption scandal significantly damaged its reputation and it couldn’t bounce back.

The Santa Fe Trail Investment Club had to dissolve due to the scandal.

“We consciously decided to dissolve the club,” said Mitchell. “However, in the end, everyone was reimbursed.”

Although, FDIC provided protection to the depositors, the employees and stakeholders of Heartland Bank suffered significant consequences, one of which included loss of investment and pensions.

Hanes volunteered to not bring the initial trial of state charges against him to court and the case is now set to be heard on May 6th.

During a status hearing held in Morton County on Feb 29, Magistrate Judge Ethan Harder rejected a request made by Hanes’ representation for a travel allowance to Florida for his daughter’s swim meet and a brief family vacation to Disney World. Hanes had earlier handed over his passport in Wichita as part of his bond agreement for the federal case.

Drawing from the bank failure, technology, especially the increased use of digital documents since the outbreak of the pandemic, creates a conducive environment for fraudulent activities, explains Mitchell.

“Technology makes such scams easier,” he observed. “We must face this challenge.”

Mitchell further adds that the Elkhart community has always been tenacious – “a community that revels in good times and unites during tough ones”. Founded in 1913, this town of less than 2000 residents witnessed the worst of the Dust Bowl.

“The Heartland bank failure has left many hard-working people devastated,” revealed Mitchell. “These are indeed good-natured people who have suffered a great injustice.”

Open discussions based on facts are imperative for the community to move past this calamity, believes Mitchell.

On Tuesday, at a meeting hosted by prosecutor Thompson, around 30 victims participated which included ex-members of the now-defunct Santa Fe Trail Investment Club. The sense of betrayal ran deep. A shocking revelation was that just a few days before the bank collapse, Hanes lied to the board about the bank’s insurance liability amount. Mitchell shared that while Hanes claimed it to be $100 million, the actual insurance coverage was a meager $2 million.

As per Mitchell, when Thompson inquired about the group’s fair sentencing for Hanes, one comment was, “Even if he was freed a day before his death, that would still be a short sentence.”

Max McCoy is a renowned author and journalist. The opinion section of the Kansas Reflector aims to amplify the voices affected by policy changes or those left out of public discourse. More information on submitting commentary can be found here.