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A cryptocurrency scam that turned a small town against itself
- mathewdaves13 2y ago[flagged]
- vanc_cefepime 2y agohttps://archive.is/uLKnj https://archive.is/uLKnj
- onlyrealcuzzo 2y agoThis wasn't a sophisticated attack - Pig Butchering: https://en.wikipedia.org/wiki/Pig_butchering_scam https://en.wikipedia.org/wiki/Pig_butchering_scam. The scammers promised him outrageous returns, and he kept giving them more and more money - without ever actually seeing any real returns. One has to wonder how this bank ever managed to be successful before. With all the fraud and scams in the world - how did no one find this guy sooner?
- hylaride 2y agoIt's a classic example of a long-term trust network getting breached, in this case by a trusted local that got in over their head. The bank was created to provide loans to locals, mostly farmers where everybody knew how farm loans worked and obviously did well doing that. People don't understand that these trust networks are only as strong as the weakest link. Even with everyone having good intentions, they don't understand that people can be blackmailed, have mental health breakdowns, etc.
- JKCalhoun 2y agoIt's also a more poignant tale of a small, community where (thanks, Internet!) international grifters could nonetheless inject themselves. Or, more cynically, this guy was destined to be scammed and the internet in short order put him to the test. One has to think though that if it were a local scammer we would not be talking tens of millions of dollars.
- kingofheroes 2y agoIts interesting to think about it this way. Like, this community's "financial opsec" was their isolation from the rest of the world. No one on the outside can attack them if no one can even point out the town on the map. The internet makes that approach impossible.
- JKCalhoun 2y agoYeah, it might even be worst than that. If I were a scammer I would seek out these small-town banks looking for my mark. And while we're at it, find the business owners of the auto dealerships in any metropolitan area. These families and the ones that own the largest construction contractor companies are the lesser-known millionaires living in our midst that might have large bank accounts. And who knew small town church coffers might have millions lying around.
- Aurornis 2y agoThe profiles of scam victims aren’t always what you expect. A lot of otherwise successful people reached their positions through networking, trust, and risky bets that advanced their careers. A lot of businesses operate on trust networks at some level. The difference is that successful operators in this space will only place calculated bets and will rapidly update their level of trust when someone fails to follow through. This person apparently didn’t learn that lesson. There is also a tendency to keep digging once a victim is deep in the hole. They know their job is already lost if they stop now, but just maybe there’s a chance that a little more digging will reveal a turnaround that covers up their past mistake. Scammers exploit this to encourage incrementally more digging into an already deep hole.
- the_snooze 2y ago>A lot of businesses operate on trust networks at some level. 100% this. No one is immune. Not even "savvy tech people;" Theranos and FTX were similar affinity frauds (https://en.wikipedia.org/wiki/Affinity_fraud https://en.wikipedia.org/wiki/Affinity_fraud) commited against Silicon Valley old-money and VC circles, respectively.
- throwup238 2y agoTo be clear: no biotech VC ever invested in Theranos. The people who are actually “savvy” in that industry (everyone) stayed clear because even cursory due diligence revealed the core problem with the science. That’s what separates competent people from rubes and tech VCs. A bit of due diligence.
- harikb 2y ago+1. It is also possible for tech savvy people to fall for regular scams (automated text in the middle of the night from your bank etc..). It is 2025 - still banks can't do everything through their apps. To Fintech: Stop SMS based OTP , have better apps. You no longer have the excuse that you can't hire engineers.
- JKCalhoun 2y agoWhy I've not been scammed. Why I'm not successful.
- ryandrake 2y ago"This Guy" is everywhere. People fall for scams all the time, and as a society, we are failing to educate them with the sense to sniff them out. That, and a regulatory environment where everything goes, means that people of all walks of life are getting suckered every day. Only a matter of time that one of those people happened to be a small local bank manager with access to millions. If it wasn't a crypto scam, it would be a lottery scam, or a job offer scam, or romance/pigbutchering scam, or a tech support phone scam, or a meatspace MLM scam like Amway and Herbalife. There is no shortage of ways gullible, financially-illiterate people can be separated from their money.
- ToucanLoucan 2y agoThis exactly. And Crypto's biggest "innovation" by far was giving us an entirely new unregulated financial market with zero consumer protections that included, as a bonus, the trappings and added complexity of software and let con men the world over dust off every money scheme from the last hundred years and do a fresh round. Edit: Further, "education" shouldn't even be a factor here. You should not need to protect yourself from being scammed. Taking advantage of people's trust and stealing their money should be illegal, the offenders should be punished, and the victims made whole. There is no reason in a civilized society to permit financial crimes, which is what this shit is. Stealing is fucking stealing, whether you take something from a store, whether a bank issues bullshit fees, whether an employer doesn't pay fair wages, whether a con man tricks you into buying ape pictures.
- plagiarist 2y agoYep. Much of cryptocurrency content is just "Discover Why Financial Regulations Exist" speedruns.
- Animats 2y ago> You should not need to protect yourself from being scammed. Under the current administration, you need to protect yourself far more than before. - The Consumer Financial Protection Bureau is gone. - The Justice Department will focus on "violent crime", even though that's mostly the job of local law enforcement and the FBI doesn't handle 911 calls. In terms of dollars, white collar crime is far bigger than violent crime. (Burglary in the US is way down, about a fifth of what it was in 1990.) - The administration plan is to move crypto enforcement from the Securities and Exchange Commission to the Commodity Futures Trading Commission. Heavy payoffs by the crypto industry have enabled this. [1] It's called "deregulation", suckers. Open season on Americans. [1] https://www.nytimes.com/2024/11/06/technology/crypto-industry-spending-election.html https://www.nytimes.com/2024/11/06/technology/crypto-industr...
- tetromino_ 2y agoI wonder if something literally went wrong with this guy's head. Early onset dementia or something along those lines. And alas, the scammers discovered him before the doctors did.
- hylaride 2y agoThe fact that a decade previously in 2011, Hanes had been found to push a bunch of questionable loans, was fired, but then a year later was back in as president shows that he probably just got greedy.
- dr-detroit 2y ago[dead]
- doctoboggan 2y ago> without ever actually seeing any real returns. I am sure he "saw" real returns on a very real looking app or website. As we transition to a cashless society we are all getting use to the numbers on our computers and phones representing real money. My paystub is digital, it goes into my bank account directly and the numbers on my computer go up. I spend money by taping a computer chip onto another computer chip and then the numbers in my bank account drop. I can also digitally transfer those numbers to a brokerage account and click a few buttons and then the numbers go up and down depending on how people are feeling about the stock market. In the past few years, seemingly always up, which I think is priming young or naive investors to believe investments never fail.
- lotsofpulp 2y ago> I think is priming young or naive investors to believe investments never fail. Investments fail, there are plenty in the news. Broad market indices, however, don’t fail. There have been numerous bailouts over the previous decades. Why would one assume any future government wouldn’t continue bailouts if all the previous ones did?
- sour-taste 2y agoWe've never had an executive whose financial policy positions include eliminating FDIC and that much of the federal deficit is fraudulent so can safely be disregarded and left unpaid. Believing in continuity at this time is a poor bet.
- HeatrayEnjoyer 2y agoGovernments and nations collapse. Anyone who was bullish in 235 CE Rome would have died long before their investments would be back in the black.
- mandevil 2y ago235 CE Rome? The Western Roman Empire lasts another two centuries- Romulus Augustus is deposed in 476 CE. That's longer than the US Constitution has existed (ratified in 1788).
- jslaby 2y agoUnless I missed somewhere in the article, it is possible that it wasn't a scam and he probably just leveraged his initial stake. When it fell below the margin, he needed the money to avoid the loss.
- baobabKoodaa 2y agoThe article talks about him being persuaded by persons "met on the internet" to "invest" in "crypto". There is absolutely no scenario in which an attractive woman sends you a LinkedIn message with the intent of getting you to make legitimate - albeit leveraged - crypto investments.
- LiquidSky 2y ago>One has to wonder how this bank ever managed to be successful before. The article touches on exactly this: >No one in Elkhart has managed to make sense of the mystery at the center of the betrayal: Why did a successful, financially sophisticated banker, a man the whole town trusted for decades, gamble his life away for a shot at crypto riches? Though this guy had been previously fired from the same position at the bank in 2011 for financial irregularities under his watch, so they kind of only have themselves to blame: >But in 2011, the leaders of the Kansas Bank Corporation grew concerned about Hanes, according to Tina Call, who served on the company’s board at the time. They had discovered problems in his loan portfolio — borrowers who lacked sufficient collateral, financial paperwork that didn’t seem to add up. >Hanes was eventually fired for reasons that remain in dispute years later.
- edm0nd 2y ago[flagged]
- NetOpWibby 2y ago[flagged]
- dang 2y agoPlease don't do this here.
- Analemma_ 2y agoCryptocurrency is so completely run-through with scams, top to bottom, that frankly it needs to become a criminal violation of fiduciary duty to go anywhere near it if you are managing other people's money (and they have not explicitly consented to invest in crypto stuff). Do you manage a bank, and you touch crypto? Arrested. Do you manage a pension fund, and you touch crypto? Arrested. Are you in charge of a trust, or in some other way a caretaker of someone else's money, and you touch crypto? Arrested. This needs to be done loudly and often to make it very clear to everyone involved in the business of managing others' money that they should treat everything even remotely cryptocurrency-related as radioactive.
- hobs 2y agoWe both wish, the president of america is running a crypto-scam.
- mingus88 2y agoHalf scam, half money laundering for favor Crypto seems to be purpose built to enable laundering of massive amounts of money under the guise of a bad investment.
- jarsin 2y agoAnd the whole thing is propped up by dubios financial engineering by the likes of Tether and Microstrategy who are complicit with the sketchy exchanges. ETH is the stock market of the 1920's. Rugpulls and blatant pyramid schemes everywhere you turn.
- justin_oaks 2y agoFirst, I agree with you. Dealing in nearly all crypto-currencies is financially irresponsible whether it's your own money or other people's. That said, perhaps Hanes would have been duped by an similar non-crypto scam. It seems that all he needed was some online contacts and a fake web page with numbers on it. Ultimately, it wasn't the crypto that was the problem. The problem was that he stole other people's money. He didn't mismanage it; he stole it.
- Imustaskforhelp 2y agothanks
- dang 2y ago(detached from https://news.ycombinator.com/item?id=43116685 https://news.ycombinator.com/item?id=43116685 so I can pin the latter to the top. nothing wrong with saying thanks of course!)
- jmuguy 2y agoSounds like this was bound to happen sooner or later. Why was this fool allowed to wire that much money out of the bank - he was only caught when he asked someone outside of the bank to literally give him 12 million dollars.
- fallinditch 2y agoThis story is featured in episode 1 of the Scam Inc podcast series from The Economist. Pig butchering scamming is a huge business, well worth a listen. https://www.economist.com/audio/podcasts/scam-inc https://www.economist.com/audio/podcasts/scam-inc
- ethansimmons 2y agoIncredible podcast.
- mvdtnz 2y agoI got very annoyed by his portrayal in the first and especially last episodes of this podcast. Especially by the woman in the last episode who said her heart was broken for him and there was no justice in locking him up. Shan Hanes was both a victim and a serious criminal. If he had lost just his own money I'd feel terrible for him. But as he got in deeper he was knowingly taking money first from his employer and later directly from his own customers' accounts. He took steps to cover his tracks. Shan Hanes is exactly where he belongs. Edit - I listened back. Her name is Kathy Wilson, a mental health professional in Colorado. She called criticism of Shan "victim blaming". She compared his situation to the bank being robbed at gunpoint. She again calls his sentence "victim blaming". I will say I think his 24 year sentence is barbaric but I often feel that way about American prison sentencing.
- worik 2y agoHe was a thief that stole people's life savings. He was used by more successful thieves. He is still responsible for his actions I feel terribly sad for him, a tragedy for him and his. But he choose to steal
- jrochkind1 2y agoagreed on all accounts
- liveoneggs 2y agoThe all-American dream success story "A part-time preacher at a local church, Hanes embodied a certain small-town ideal: He lived in a nice house with his wife and three daughters and volunteered at high school football games." Testing the waters "Hanes was eventually fired for reasons that remain in dispute" Hubris works "Hanes assembled a group of local investors who started a bid to buy the bank and restore control" Self-immolation where the lies stop working "After draining his personal savings, Hanes began stealing — from his local investment club, from his church and finally from the bank." And, as you note above, the conman still has his defenders ready to open their hearts (and probably checkbooks!) for another round.
- renewiltord 2y agoWhat a moron. This explains why private equity is so successful. Small town businesses are good businesses but they’re often run by morons who inherited their stuff. Once you buy them out you can drive costs down and be efficient and just not send your money to Nigerian princes.
- me_again 2y agoSeems to me private equity is often, though not always, a terrific way to run a previously-stable business into the ground in short order. See for example https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423290 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3423290 .
- jarsin 2y agoA well run company that's owned by PE. That's an oxymoron. PE typically raises prices. Replaces all good employees with the cheapest. Then runs up debt that they have no intention of paying back all under the guise of expansion.
- sunshowers 2y agoPrivate equity is successful because there's a lot of money to be made in strategies most people would find unconscionable (even if not illegal), not because it makes better decisions than the worst 5% of business owners.
- xenago 2y agoThere was nothing stopping a gullible manager from just ... transferring all the money away? uh
- 0cf8612b2e1e 2y agoSure makes it seem trivial to just take the money and run. No need to involve any pig butchers in the process.
- jrochkind1 2y agoSo he was the CEO, all the way at the top, not just a manager -- but yes, it seems like there were some things that could be improved with their controls, in retrospect. It was a small bank, looks like probably only a dozen or so employees total, if that paints a picture of how this might have happened. Aha, here's the writeup by the Federal Reserve, very well-done! > Heartland employees circumvented the bank’s internal controls and policies; following those internal controls and policies may have prevented or detected the alleged fraudulent activity. We believe that the CEO’s dominant role in the bank and prominent role in the community contributed to a reluctance on the part of Heartland employees to question or report the alleged fraudulent activities earlier. > The events leading to Heartland’s failure revealed a significant breakdown of internal controls, including controls related to wire transfers and suspicious activity reports (SARs). Specifically, senior bank employees circumvented the bank’s wire policy and daily limits to approve and process the CEO’s alleged fraudulent wire transfer requests. Additionally, Heartland employees did not follow the bank’s Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) (together, BSA/AML) policy. https://oig.federalreserve.gov/reports/board-material-loss-review-heartland-tri-state-bank-feb2024.pdf https://oig.federalreserve.gov/reports/board-material-loss-r... Yer policies are only as good as the people following them...
- fallinditch 2y agoThis is why you get so many unknown number calls and texts. Best not to answer or reply. Back in 99/00 a friend of mine received the 'I am a Nigerian prince' email. This scam was very new at the time and neither of us had seen anything like it before. My friend was believing and accepted it as a good money making opportunity, whereas I was instantly 'this is so obviously some kind of dodgy thing'. Luckily I was able to persuade him to not follow up.
- Jimmc414 2y agoWhile Hanes's actions were criminal, another big story is about systemic failures in their banking controls and how they contributed to this failure: Board allowed a single individual to wire tens of millions without additional approvals No automated systems flagged the unusual transaction patterns Previous red flags from Hanes's 2011 firing for questionable loans didn't lead to enhanced oversight Board continued considering his requests for more money ($18M) even after learning of the initial theft Reliance on personal trust and reputation substituted for proper institutional controls No separation of duties or multi-party approval requirements for large transfers Community banks need strong governance regardless of size or personal trust relationships.
- esotericimpl 2y ago[dead]
- refulgentis 2y agoI respect the spirit, but I can't think of a system of controls, or a matroyshka doll of sign-offs, that ends up with the small bank CEO not being able to give orders, at least, without the bank being O(1000s) of employees as opposed to...10s, optimistically.
- dmix 2y ago> but I can't think of a system of controls that ends up with the CEO not being able to give orders unilaterally most of the time The primary system of control for small shops is going out of business when you're dumb enough to lose $47M and getting replaced by more competent people running the competition
- immibis 2y agoAnd there are no murderers, because they are sent to prison.
- SteveNuts 2y agoThe CEO can give orders, but there should be literally no way for a single person to transfer that much money without approval. Even our accounting system is integrated with a vendor management platform that first verifies the recipient is a known vendor, and tied to the banking part that actually issues an ACH/wire transfer such that it can't happen until approved. The fact that there's essentially zero governance at a bank is unacceptable.
- jrochkind1 2y agoPreviously discussed around coverage around Hane's sentancing 6 months ago. https://news.ycombinator.com/item?id=41314542 https://news.ycombinator.com/item?id=41314542
- j_timberlake 2y agoThe lesson here isn't "don't fall for scams", that's obvious, and it just takes a more sophisticated set of lies to trick smarter people out of their money (Enron + Arthur Anderson). The real lesson is "don't use other people's money for your own schemes", which is exactly how he got rich to begin with. Banking taught him the opposite lesson for years. And voters couldn't care less about primary'ing politicians for banking regulation even after the mortgage crisis, so it will never, ever stop.
- elwood_b 2y agoI hear the same thing happened beforehand in Brockway, Ogdenville and North Haverbrook
- nocoiner 2y agoEh, it sounded to me like it might be more of a Shelbyville thing.
- YesThatTom2 2y agoWhy is this a BAD thing? The goal of cryptocurrency is to have a financial system with none of that pesky government regulation. Yes, there will be scams but eventually people will learn non-governmental solutions that (my libertarian friends tell me) will be net better than government regulations. “Bug closed/works as intended.”
- LinuxAmbulance 2y ago> The goal of cryptocurrency is to have a financial system with none of that pesky government regulation. Except it's just a speculative asset, not an actual financial system, unless you count its use by criminal elements to actually transfer funds. Ledgers can't scale to allow for a financial system that could serve an entire country either, due to transaction speed issues. I think there's some good ideas involved - a financial system not under the control of a government, but the current implementation of everything crypto is failing at everything other than financial speculation.
- beeflet 2y agoThere is nothing stopping people from using it as peer-to-peer cash. I used crypto sell a GPU to someone I know. I regularly use it to trade hardware over the internet, and I would use it more if more vendors on ebay and such accepted it. It has low fees, works with open source software, and is pretty straightforward to accept without fear of charge-backs or fraud. The volatility is only a problem in the short term, and I don't mind holding on to crypto despite volatility because it has a lower inflation rate than the USD. >Ledgers can't scale to allow for a financial system that could serve an entire country either, due to transaction speed issues. A lot of the issues with transaction throughput have to do with the network parameters of old cryptocurrencies like bitcoin which were optimized for a 2009 internet. A single ledger can't scale, but if you just boosted the block size of a bitcoin-like cryptocurrency to ~200MB you would have transaction throughput on the order of paypal. If you do payment channels on top of that and/or have atomic swaps between multiple merge-mined ledgers I think that you would have a decentralized payment network which could serve the entire world's current needs, at least for online transactions.
- joshstrange 2y ago> For now, though, he relishes the idea that Hanes will suffer in prison, enduring sleepless nights and days filled with misery. I both completely understand how/why he feels that way and am also disheartened that this is so many people's viewpoint on prison. All that said, Hanes is/was an idiot and a snake. It's one thing to be taken for a scam, it's another to steal from work/church/friends/etc for a scam. One I can forgive, the other, not so much.
- breadwinner 2y agoJohn Reed Stark, former Chief of Internet Enforcement of SEC, explained it best on 60 minutes: Crypto is a scourge, it is not something you want in your society. It has no utility. It is pure speculation. There is no balance sheet to crypto, there is no financial statements. There is no audit inspection, examination, net capital requirements, no licensure of individuals involved, and there is no transparency into it. That creates real systemic risks, not just risks for investors. But the other part people don't talk about enough is the dire externalities that are enabled by crypto. Every single crime you can think of, is easier to do now because of crypto. Especially ransomware, human sex trafficking, sanctions evasion, money laundering. North Korea is financing their nuclear program using crypto. Crypto companies accounted for almost half of corporate donations in the 2024 election cycle, with some contributing tens of millions of dollars to help Trump win a second term in office. Trump previously called Bitcoin 'a scam against the dollar', but after crypto industry plowed tens of millions into the election, Trump is now for it.
- theragra 2y agoNot true. Crypto has utility, albeit niche. What I ideally want to see is crypto used for small purchases and donations. This is area where traditional money failed miserably.
- trhway 2y ago>the dire externalities that are enabled by crypto. Every single crime you can think of, is easier to do now because of crypto. replace crypto with railroad in the 19th century. Or even just Internet in the 90-ies. Or AI in 20 years.
- plumthreads 2y agoThose technologies offered actual utility, that's the difference.
- immibis 2y agoMoney also offers utility. Money that you can't transfer because the government thinks you're a drug mule does not. Crypto allows you to transfer money, even if the government thinks you're a drug mule.
- fancyfredbot 2y agoIt's inevitable I suppose that if we allow large numbers of banks to exist then some of them will have poor management and poor controls. It's better when tiny banks get scammed by crypto brokers than when large banks start trading CDOs with poorly understood correlation risks.
- holden_nelson 2y agoOne thing that stood out to me was that all of these relatively small-time "rich by Kansas standards" farmers lost a huge chunk of their wealth when one institution went insolvent. I was wondering, why didn't they diversify their investments? There's this line: > In 2012, Hanes returned as president of Heartland, which adopted an ownership structure that has become common across America: The bank was controlled by a group of roughly 35 local investors, including Hanes and his wife, as well as Jim Tucker and his father. No one outside Elkhart would dictate the bank’s future, and all the profits would flow back into the area. Ahh, ok, so they probably couldn't just sell their shares on the open market. And this is not to blame the victims, of course. I guess this is a downside of this business structure. I wonder if there are ways to mitigate this risk - some sort of insurance?
- nonce42 2y agoImportant: If you've received a text from a wrong number, this article describes exactly the Pig Butchering scam that you're being set up for. Have you received a random text like "Shall we grab a coffee soon?", "How have you been lately?", or "Let's go to the new restaurant." You'll find that an attractive, professional woman texted you by mistake, but she thinks you're a friendly person and wants to keep talking. After a few weeks, she'll tell you about all the money she made through investments and offer to help you invest. As you put in more and more money, you'll see huge returns on the (fake) website. When you eventually try to withdraw your fortune, there will be a small fee, followed by a tax payment, followed by more fees. Worst case, you end up like the banker in the article, frantically trying to borrow $18 million so you can recover the mythical $47 million. This is an extremely common scam; the group https://reddit.com/r/scams https://reddit.com/r/scams is very interesting, with many stories of this scam and others. Key takeaways: it's easier to get scammed than you'd think. Never spend money to withdraw money. Don't respond to wrong-number texts. Anyone who wants cryptocurrency (or gift cards) is scamming you.
- Bramfloris 2y ago[dead]
- tyreu 2y ago[dead]
- Aguad84 2y ago[dead]
- Murphysharon 2y agoThere are a lot of untrue recommendations and it's hard to tell who is legit. If you have lost crypto to scam easyrecoveryassets@gmai com is the best option I can bet on that cause I have seen lot of recommendations about them and I'm a witness on their capabilities. They will surely help you out. Took me long to find them. The wonderful part is no upfront fee till crypto is recover successfully that's how genuine they are
- tyreu 2y ago[flagged]
- tyreu 2y agoIt's very sad that people do that! It's even worse when you are the victim. I have been there as well, and, A P T R E C O U P, a non profit organization set up by people who have been victims came to my rescue. Look them up online
- phillipangie23 2y ago[dead]