A courtroom of relief: Feds recover funds for victims of scammed banker

Article content

WICHITA, Kan. (AP) — Sighs of relief erupted in a Kansas federal courtroom Monday when dozens of people whose savings a bank executive embezzled learned that federal law enforcement had recovered their money.

“I can’t describe how much money Bart started saving when he was 18 when he bought his first individual retirement,” said Bart Camelli, 70, who along with his wife, Cleo, just learned they will get nearly $450,000 back, an amount Bart began saving when he was 18 when he bought his first individual retirement. “The burden has been lifted from us.” account. “It changes lives.”

Article content

In August, Shan Hans, former CEO of the Bank of Kansas, was sentenced to 24 years in prison after stealing $47 million from customer accounts and transferring the money to cryptocurrency accounts run by scammers. Prosecutors said Hans also stole $40,000 from his church, $10,000 from an investment club, $60,000 from his daughter’s college fund, and lost $1.1 million of his own money in the scheme. Prosecutor Aaron Smith said the deposits were “disposed of into the ether”.

Hanes Heartland Tri-State Bank, drained of cash, has been shut down by federal regulators and sold to another financial institution. Customers’ savings and checking accounts amounting to $47.1 million were insured by the Federal Deposit Insurance Corporation, which reimbursed their losses.

But there were still 30 shareholders in the community-owned rural bank that Hans helped found — including close family friends and neighbors — who believed they had lost $8.3 million in investments: Well-planned retirements had been upended, and money for elderly care gone In the long term, education. Money and bequests to children and grandchildren are zero.

On Monday, shareholders stood to cheer as federal Judge John W. Broomes in Wichita after he told them, one by one, that they would be paid in full. The FBI recovered funds from a cryptocurrency account held by Tether Ltd. In the Cayman Islands.

Article content

Article content

During a pre-sentencing hearing, these victims described Hans as a “deceiver and a liar” and “pure evil.”

Margaret Grace appeared in court Monday thinking she would get $1,000. Instead, she learned she would get nearly $250,000 back, her entire 401(k).

“I’m so happy,” she said. “I can breathe.”

Prosecutors said Hans, who was CEO of Heartland Tri-State Bank in Elkhart, Kansas, lost money in a scam referred to as “hog slaughter,” or the method by which pigs are fattened before being slaughtered. In the scam, a third party gains the trust of victims and, over time, convinces them to invest all their money in cryptocurrency, which then instantly disappears. US and UN officials say these schemes are spreading, with scammers largely in Southeast Asia increasingly taking advantage of Americans.

Hans began purchasing what he thought was $5,000 of the cryptocurrency in late 2022, and reached out to someone who communicated via WhatsApp, according to court records. A few months later he transferred funds from his church and investment club. Records show the fraud accelerated in the summer of 2023, when Hance transferred $47.1 million from customer accounts in 11 wire transfers over the course of just eight weeks. Each transfer was believed to be necessary to terminate the investment and withdraw the funds, court records said. And watch on a fake website as the money appears to grow to over $200 million.

Article content

“He had to take some of the money, and the rest of the money was supposed to go back to the bank,” his attorney, John Stang, explained. “Now it’s a fantasy, and it doesn’t exist. We all know that now…it failed miserably.”

Hans, who was not in court Monday, apologized at a pre-sentencing hearing.

“From the deepest depths of my soul, I had no intention of causing the harm that I did,” he said. “I will forever struggle to understand how I was scammed and how what I thought was just getting the money back was making it worse.”

Prosecutors said Hans was not just the victim of a scam, but crossed the line when he began taking customer money and violating banking regulations. He pleaded guilty to embezzlement by a bank employee in May.

His high profile in his hometown of 2,000 made it easy for him to escape punishment, an investigation by the Federal Reserve System found. He has been a member of the school board, volunteered as a swim meet official, and served on the Kansas Bankers Association.

He was also a banking leader outside his rural community. In recent years, he has testified before congressional committees about the importance of community banks in agricultural communities, and has served as a director of the American Bankers Association, which represents nearly all banking assets in the United States.

Article content

Prosecutors said Monday that the Federal Deposit Insurance Corp. (FDIC) wanted to recover insurance claims it had paid to bank customers. But Judge Broomes said the economic circumstances of shareholders “made insolvent by a Ponzi scheme” warranted paying them first, before the FDIC recovered anything.

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

In a lawsuit, Hans and his lawyer tried to explain what happened.

“Mr. Hans made some very bad choices after falling for a very well-run cryptocurrency scam,” they said. “He’s the pig that got slaughtered.”

Article content