24 years in jail for former bank director after multi-million crypto fraud

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Heartland Tri-State Bank (HTSB) was a small regional bank in Elkhart, Kansas, that suddenly closed at the end of July 2023. The former director of HTSB had embezzled 47.1 million US dollars because he had fallen for a cryptocurrency scam. This so-called"pig butchering" requires constant new deposits and after Shan H. had already used up his own savings and those of his children, he used capital from his bank. He has now been sentenced to 24 years in prison.

According to the US Attorney's Office, 53-year-old Shan H. was driven by "boundless greed" to make profits from his investments in cryptocurrencies. To do so, he breached his professional duties, jeopardized his personal relationships and violated federal laws, according to a statement. US Attorney Kate E. Brubacher said that Shan H. not only defrauded HTSB and its investors, but also jeopardized trust in financial institutions.

Crypto scam via WhatsApp turns into million-dollar fraud

Shan H. was a bank director at HTSB when he was contacted by previously unknown persons via WhatsApp at the end of 2022 and persuaded to invest in cryptocurrencies. After initial deposits, these were to be confirmed by further money transfers in order to ultimately generate profits. After using his own savings, Shan H. initially stole 40,000 dollars from a local church he was a member of and 10,000 dollars from an investment club in early 2023, writes NBC News.

He also took $60,000 from a fund to pay for his daughter's college education and $1 million from a local investment club, Shan H.'s lawyer confirmed. In May 2023, he began embezzling funds from his bank for further investments in cryptocurrencies, as described in the complaint filed with the US District Court in Kansas (Case No. 6:24-cr-10013-JWB). To this end, he successively instructed bank employees to make at least 11 transfers by July 2023, totaling 47.1 million dollars.

Private loan request was the beginning of the end

He gave different people at the bank different reasons for these payments. His dominant position within the bank and his respected position in the community helped him. However, the promised profits had not materialized by this time either.

At the beginning of July, Shan H. then asked a neighbor to lend him 12 million dollars. He would get the money back within ten days – plus one million dollars in interest. The neighbor became suspicious, refused and informed the bank's board of directors. A few days later, Shan H. was fired and another two weeks later the bank was closed. The US Attorney's Office holds Shan H. responsible for the bank's collapse.

Bank customers insured, but investors lose out

As the bank's deposits were insured, the US Federal Deposit Insurance Corporation (FDIC) covered the loss of 47.1 million dollars, meaning that bank customers' savings were not lost. However, investors in the bank itself lost 9 million dollars. It is unlikely that this can be recovered in full, but this will be decided in separate proceedings within the next three months.

Shan H. was facing a prison sentence of up to 30 years for embezzling from the bank. The public prosecutor's office had demanded 22 years in prison, as the former bank director had fully confessed. However, the judge went beyond this and imposed 293 months in prison – 24 years and 5 months. When handing down the sentence, the judge explained that Shan H. had "no really good answers" to questions about his actions.

(fds)