A courtroom of relief: FBI recovers funds for victims of scammed banker

WICHITA, KANSAS — Sobs of relief broke out in a federal courtroom in Kansas on Monday as dozens of people whose life funds had been embezzled by a lender CEO learned that federal law enforcement had recovered their money.

“I just can’t describe the weight lifted off of us,” said Bart Camilli, 70, who with his wife Cleo had just learned they’d recover close to $450,000 — money Bart began saving at 18 when he bought his first person retirement fund account. “It’s life-changing.”

In August, former Kansas lender CEO Shan Hanes was sentenced to 24 years after stealing $47 million from customer accounts and wiring the money to cryptocurrency accounts run by scammers. Prosecutors said Hanes also stole $40,000 from his church, $10,000 from an financing club and $60,000 from his daughter’s college financing and lost $1.1 million of his own in the scheme. Deposits were “jettisoned into the ether,” said prosecutor Aaron Smith.

Hanes’ Heartland Tri-State lender, drained of liquid assets, was shut down by federal regulators and sold to another budgetary institution. Customers’ funds and checking accounts amounting to $47.1 million were insured by the Federal financing Insurance Corp., which paid off their losses.

But there were still 30 shareholders of the throng-owned rural lender Hanes helped found — including his close household friends and neighbors — who thought they lost $8.3 million in investments: well-planned retirements were upended, funds for long-term eldercare gone, education funds and bequests for children and grandchildren zeroed out.

On Monday the shareholders stood to cheer federal Judge John W. Broomes in Wichita after he told them, one at a period, that they’d be paid back in packed. The FBI recovered the funds from a cryptocurrency account held by Tether Ltd. in the Cayman Islands.

During an earlier sentencing hearing, these victims had called Hanes a “deceitful cheat and a liar,” and “pure evil.”

Margaret Grice came to court Monday figuring she’d get $1,000 back. Instead, she learned she’d be recovering almost $250,000, her entire 401(k).

“I’m just really thrilled,” she said. “I can breathe.”

Prosecutors said Hanes, who was the CEO of Heartland Tri-State lender in Elkhart, Kansas, lost the money in a scam referred to as “pig butchering,” or the way pigs are fattened before slaughter. In the scam, a third event gains a victims’ depend and, over period, convinces them to invest all of their money into cryptocurrency, which immediately disappears. U.S. and U.N. officials declare these schemes are proliferating, with scammers largely in Southeast Asia increasingly taking advantage of Americans.

Hanes started buying what he thought was $5,000 in cryptocurrency in late 2022, communicating with someone who had reached out on WhatsApp, according to court records. A few months later he transferred over his church and financing club funds. Records display the scam accelerated in the summer of 2023, when Hanes wired $47.1 million out of customer accounts in 11 wire transfers over just eight weeks. Each transfer, he thought, was essential to complete the financing and liquid assets out, court records said. He watched, on a fake website, as the money appeared to develop to more than $200 million.

“He was to receive some of the money, and the rest of the money was supposed to leave back to the lender,” his attorney John Stang explained. “Now it’s falsehood, it didn’t exist. We all recognize that now … It failed large period.”

Hanes, who was not in court Monday, apologized at an earlier sentencing hearing.

“From the deepest depth of my soul, I had no intention of ever causing the damage that I did,” he said. ”I’ll forever battle to comprehend how I was duped and how what I thought was just getting the money back was making it worse.”

Prosecutors said Hanes wasn’t just the victim of a scam, he crossed a line when he began taking customers’ money and violating banking regulations. He pleaded guilty to embezzlement by a lender officer in May.

His prominent standing in his hometown of 2,000 made it easier for him to get away with it, a Federal safety net structure investigation found; he had been on the school board, volunteered as a swim meet official, and served on the Kansas Bankers Association.

He also was a banking chief beyond his rural throng. In recent years, he testified to Congressional committees about the importance of local banks in farming communities, and he served as a director for the American Bankers Association, which represents almost all banking assets in the U.S.

On Monday, prosecutors said the FDIC wanted to be paid back for the insurance claims it reimbursed to lender customers. But Judge Broomes said the economic circumstances of shareholders “who became insolvent because of a fraud scheme” justified paying them back first, before the FDIC recovers anything.

Hanes, 53, may be in his late 70s when he is released and is unlikely to be able to pay the FDIC the $47.1 million still owed.

In a court filing, Hanes and his attorney tried to explain what had happened.

“Mr. Hanes made some very impoverished choices after being caught up in an extremely well-run cryptocurrency scam,” they said. “He was the pig that was butchered.”