A cryptocurrency scam that turned a small town against itself

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While Hanes&#x27;s actions were criminal, another big story is about systemic failures in their banking controls and how they contributed to this failure:<p>Board allowed a single individual to wire tens of millions without additional approvals<p>No automated systems flagged the unusual transaction patterns<p>Previous red flags from Hanes&#x27;s 2011 firing for questionable loans didn&#x27;t lead to enhanced oversight<p>Board continued considering his requests for more money ($18M) even after learning of the initial theft<p>Reliance on personal trust and reputation substituted for proper institutional controls<p>No separation of duties or multi-party approval requirements for large transfers<p>Community banks need strong governance regardless of size or personal trust relationships.

This wasn&#x27;t a sophisticated attack - Pig Butchering: <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Pig_butchering_scam" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Pig_butchering_scam</a>.<p>The scammers promised him <i>outrageous</i> returns, and he kept giving them more and more money - without ever actually seeing any real returns.<p>One has to wonder how this bank ever managed to be successful before.<p>With all the fraud and scams in the world - how did no one find this guy sooner?

This 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.<p><a href="https:&#x2F;&#x2F;www.economist.com&#x2F;audio&#x2F;podcasts&#x2F;scam-inc" rel="nofollow">https:&#x2F;&#x2F;www.economist.com&#x2F;audio&#x2F;podcasts&#x2F;scam-inc</a>

Important: If you&#x27;ve received a text from a wrong number, this article describes exactly the Pig Butchering scam that you&#x27;re being set up for. Have you received a random text like &quot;Shall we grab a coffee soon?&quot;, &quot;How have you been lately?&quot;, or &quot;Let&#x27;s go to the new restaurant.&quot; You&#x27;ll find that an attractive, professional woman texted you by mistake, but she thinks you&#x27;re a friendly person and wants to keep talking. After a few weeks, she&#x27;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&#x27;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.<p>This is an extremely common scam; the group <a href="https:&#x2F;&#x2F;reddit.com&#x2F;r&#x2F;scams" rel="nofollow">https:&#x2F;&#x2F;reddit.com&#x2F;r&#x2F;scams</a> is very interesting, with many stories of this scam and others. Key takeaways: it&#x27;s easier to get scammed than you&#x27;d think. Never spend money to withdraw money. Don&#x27;t respond to wrong-number texts. Anyone who wants cryptocurrency (or gift cards) is scamming you.

The lesson here isn&#x27;t &quot;don&#x27;t fall for scams&quot;, that&#x27;s obvious, and it just takes a more sophisticated set of lies to trick smarter people out of their money (Enron + Arthur Anderson).<p>The real lesson is &quot;don&#x27;t use other people&#x27;s money for your own schemes&quot;, which is exactly how he got rich to begin with. Banking taught him the opposite lesson for years. And voters couldn&#x27;t care less about primary&#x27;ing politicians for banking regulation even after the mortgage crisis, so it will never, ever stop.

Sounds 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.

It&#x27;s very sad that people do that! It&#x27;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

&gt; For now, though, he relishes the idea that Hanes will suffer in prison, enduring sleepless nights and days filled with misery.<p>I both completely understand how&#x2F;why he feels that way and am also disheartened that this is so many people&#x27;s viewpoint on prison.<p>All that said, Hanes is&#x2F;was an idiot and a snake. It&#x27;s one thing to be taken for a scam, it&#x27;s another to steal from work&#x2F;church&#x2F;friends&#x2F;etc for a scam. One I can forgive, the other, not so much.

This is why you get so many unknown number calls and texts. Best not to answer or reply.<p>Back in 99&#x2F;00 a friend of mine received the &#x27;I am a Nigerian prince&#x27; 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 &#x27;this is so obviously some kind of dodgy thing&#x27;. Luckily I was able to persuade him to not follow up.

Previously discussed around coverage around Hane&#x27;s sentancing 6 months ago.<p><a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=41314542">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=41314542</a>

Cryptocurrency 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&#x27;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&#x27;s money, and you touch crypto? Arrested.<p>This needs to be done loudly and often to make it very clear to everyone involved in the business of managing others&#x27; money that they should treat everything even remotely cryptocurrency-related as radioactive.

There are a lot of untrue recommendations and it&#x27;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&#x27;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&#x27;s how genuine they are

John Reed Stark, former Chief of Internet Enforcement of SEC, explained it best on 60 minutes:<p>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.<p>But the other part people don&#x27;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.<p>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 &#x27;a scam against the dollar&#x27;, but after crypto industry plowed tens of millions into the election, Trump is now for it.

There was nothing stopping a gullible manager from just ... transferring all the money away? uh

What 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.

I hear the same thing happened beforehand in Brockway, Ogdenville and North Haverbrook

One thing that stood out to me was that all of these relatively small-time &quot;rich by Kansas standards&quot; farmers lost a huge chunk of their wealth when one institution went insolvent. I was wondering, why didn&#x27;t they diversify their investments?<p>There&#x27;s this line:<p>&gt; 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.<p>Ahh, ok, so they probably couldn&#x27;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?

It&#x27;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&#x27;s better when tiny banks get scammed by crypto brokers than when large banks start trading CDOs with poorly understood correlation risks.

Why is this a BAD thing?<p>The goal of cryptocurrency is to have a financial system with none of that pesky government regulation.<p>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.<p>“Bug closed&#x2F;works as intended.”

thanks