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What to know about pig slaughter and the crypto scam the Kansas banker fell for
The former CEO of Heartland Tri-State Bank in Elkhart found guilty to the misappropriation of $47 million in bank funds to funnel them into a cryptocurrency scam.
Shan Hanes, the former bank executive, could be sentenced to up to 30 years, fined up to $1 million and be forced to pay up to $60.5 million in restitution. Hanes fell into what cybersecurity experts call a “pig slaughter” scheme.
What is pig slaughter?
In a pig slaughter scam, the victim – or “pig” – is tricked into making what they believe is a legitimate investment opportunity in a specific cryptocurrency. The perpetrator promises higher returns for larger investments and gradually demands more money over time.
The victim often invests in cryptocurrencies via apps controlled by the scammers or deposits their money into accounts that the scammers have access to.
The gradual increase in funds is compared to fattening a pig before slaughter, while slaughter refers to the moment when the scammer finally steals the money and permanently cuts ties.
THE Federal Bureau of Investigation said this form of online scam originated in China in 2019, but has since spread across Southeast Asia.
What we know about the Shan Hanes case
An unidentified scammer contacted Hanes via the messaging app WhatsApp asking him to invest in cryptocurrency. Hanes then initiated wire transfers from Heartland Tri-State Bank into his digital cryptocurrency wallet on the Kraken exchange.
Hanes made 11 transfers, often due to scammers claiming it would “unfreeze” previously deposited funds.
Hanes lied to bank employees, the board of directors and investors about the wires, dispersing the funds across a handful of cryptocurrency accounts controlled by other unidentified parties. Overall, bank shareholders lost between 9 and 13 million dollars.
The U.S. Attorney’s Office charged Hanes in February, and on May 23 he signed a plea agreement admitting his guilt.
What happened to the Bank of Kansas?
The State Bank of Kansas commissioner’s office announced that Heartland Tri-State Bank was insolvent in July 2023, but shared few other details at the time. The news came shortly after the failures of Silicon Valley Bank and Signature Bank, but Kansas officials said the failure was not indicative of broader problems in the banking industry.
The Federal Deposit Insurance Corporation took over the bank’s operations after it was declared insolvent, and insured customers were able to access money despite the bank’s closure. Dream First Bank of Syracuse, Kansas, acquired Heartland Tri-State and assumed responsibility for its operations. Former Tri-State customers’ accounts were automatically transferred into Dream First’s system.