In a significant development for victims of a high-profile crypto fraud case, a federal judge in Wichita, Kansas, has ordered the return of millions of dollars seized by the U.S. government from investors affected by the collapse of Heartland Tri-State Bank (HTSB). This ruling marks a crucial step towards providing partial relief to those defrauded in a $47.1 million cryptocurrency scheme that led to the bank’s downfall.
The U.S. Department of Justice (DOJ) announced on Monday that the restitution hearing resulted in a federal judge’s decision to redistribute seized funds among investors who suffered financial losses due to HTSB’s collapse. The judge’s order comes after the August 2024 sentencing of Shan Hanes, the former CEO of HTSB, who was sentenced to 293 months in prison for embezzling bank funds and funneling them into a cryptocurrency wallet controlled by third parties.
Hanes admitted to initiating outgoing wire transfers from the bank to this wallet, which ultimately contributed to the bank’s failure and resulted in approximately $9 million in losses for investors. The DOJ detailed, “While serving as CEO, Hanes initiated outgoing wire transfers of bank funds to a cryptocurrency wallet belonging to third parties. This caused Heartland to collapse and inflicted significant financial harm on its investors.”
The Federal Bureau of Investigation (FBI) played a pivotal role in recovering approximately $8 million associated with the fraudulent activities. U.S. Attorney Kate E. Brubacher praised the FBI’s thorough investigation, stating, “Through Hanes’ conviction and prison sentence, the Department of Justice obtained justice for the victims, and now with this court order, those victims will receive some financial relief.”
The case against Hanes was complex, involving his embezzlement through a cryptocurrency scheme commonly referred to as “pig butchering.” This tactic lures victims into fictitious crypto investments under false pretenses.
The court’s decision to return seized funds represents a significant victory for investors who had been left vulnerable following the bank’s collapse. Many had invested their savings, believing they were participating in legitimate financial opportunities.
The restitution order provides hope for those who lost money in this scheme, as they will now be able to recover some of their investments.
This case is part of a larger trend of increasing scrutiny and enforcement actions against cryptocurrency-related fraud schemes. In recent years, scams involving cryptocurrencies have surged, with reports indicating that investment fraud caused losses exceeding $3.31 billion reported to the FBI’s Internet Crimes Complaint Center in 2022 alone.
The DOJ and other federal agencies have ramped up efforts to combat cryptocurrency fraud through investigations and asset recovery initiatives. The establishment of specialized units within law enforcement agencies has facilitated more effective tracking and seizure of illicitly obtained crypto assets.
