Sentencing of Kansas failed-bank CEO delayed

Shan Hanes, the ex-CEO of failed Heartland Tri-State Bank who pleaded guilty earlier this year to stealing millions of dollars from the Elkhart, Kansas-based lender before it failed, will have to wait several more days for his sentence in U.S. District Court.

Hanes, 52, admitted on May 23 to embezzling the funds from the $139 million-asset Heartland Tri-State and its customers. He was charged in February.

Facing up to 30 years in prison, he was originally scheduled for sentencing on Aug. 8. A judge postponed sentencing to Aug. 19, a spokeswoman for prosecutors with the U.S. attorney's office in Wichita, Kansas, told American Banker on Monday. A reason for the delay was not immediately available.

Prosecutors said that from May to July 2023, Hanes initiated 10 outgoing wire transfers totaling $47.1 million of Heartland's funds to a cryptocurrency wallet. The money was then transferred to multiple crypto accounts controlled by unidentified third parties.

"Even as he was squandering away tens of millions of dollars in cryptocurrency, Hanes orchestrated schemes to cover his tracks concerning the losses at the bank," U.S. Attorney Kate Brubacher said in a statement.

Hanes, who could not be reached for comment, admitted in court to embezzlement, causing the bank to fail. Prosecutors said Hanes took money from multiple customer accounts, including one held by a local church.

Prosecutors said Hanes lied to the bank's board, investors and employees about the series of wire transfers. Federal authorities estimated that shareholders lost between $9.3 million and $13.4 million.

The Kansas Office of the State Bank Commissioner shuttered Heartland Tri-State and the Federal Deposit Insurance Corp. seized the bank on July 28 of last year. Dream First Bank of Syracuse, Kansas, assumed all of its deposits.

The FDIC said the agreement caused a $54.2 million hit to its Deposit Insurance Fund.

There were five failures overall last year, including three large regional banks that struggled under the weight of high interest rates and deposit runs. Those downfalls started with Silicon Valley Bank and Signature Bank in March, followed by First Republic Bank in May.

Republic First Bank in April marked the lone failure so far this year. It was closed by its state regulator and taken over by the FDIC. The Philadelphia-based bank had struggled to maintain adequate capital and faced proxy challenges from investor groups.

Fulton Bank in Lancaster, Pennsylvania, assumed substantially all of Republic First's $6 billion of assets and $4 billion of deposits, according to the FDIC.

There were no bank failures in 2022 or the year before. But four banks failed in each of 2019 and 2020, according to FDIC data.