A Kansas banker who embezzled millions from his small-town bank in 2023, resulting in its collapse, lost a significant portion of the stolen money to overseas crypto scammers in a massive DOJ bust, as per a complaint filed recently.
Prosecutors have initiated a civil forfeiture action aiming at over $225 million in laundered USDT, which was part of a fraudulent scheme linked to a call center in the Philippines that also ensnared Shan Hanes, the former CEO who embezzled $47 million from Heartland Tri-State Bank, ultimately leading to the bank's downfall in 2023.
According to the Department of Justice complaint, crypto exchange OKX played a crucial role in identifying a complex network of accounts used to launder the crypto proceeds.
The scammers made victims send USDT to 93 scam-controlled deposit addresses, then directed the funds through around 100 intermediary wallets to obfuscate their origins and mix deposits from multiple victims, states the complaint.
These laundered funds were subsequently funneled into 22 primary accounts on OKX platform, and further spread across 122 additional accounts, all connected by shared IP addresses, repeated KYC documents, and coordinated activities traced back to a Manila-based scam compound, ITECHNO Specialist Inc., as detailed in the complaint.
The laundering network generated a transaction volume of approximately $3 billion, as per the DOJ.
Largest victims
The DOJ identified a total of 434 victims, with 60 of them losing a combined $19.4 million.
Hanes emerged as the biggest victim, with $3.3 million of the embezzled $47 million being recognized by the DOJ in this seizure.
Between May 30, 2023, and July 7, 2023, Hanes executed 10 wire transfers totaling around $47.1 million from Heartland Tri-State Bank to a crypto wallet under his control, a fact supported by both the DOJ complaint and the Federal Reserve's report into the bank's collapse post the 2023 U.S. banking crisis.
The actions of Hanes drained the bank's liquidity, resulting in $21 million in emergency borrowing, and leaving the bank with a $35 million capital shortfall, leading regulators to close it down in July 2023.
CNBC reported that Hanes also misappropriated funds from various entities and was subsequently sentenced to 24 years in prison in August 2024.
The DOJ complaint referred to him as both a perpetrator and a victim.
Seized crypto likely going to Fed stockpile
Crypto confiscated by the U.S. government in cases like this is expected to be allocated to a stockpile ordered by President Donald Trump, as per reports.
The establishment of the bitcoin BTC reserve and a stockpile for other cryptocurrencies is still pending, with the Treasury Department conducting an inventory of governmental digital asset holdings to ascertain the necessary collection.
Once set up, the long-term ownership of crypto will probably segregate seized bitcoin into one fund and different types of tokens into another.
The holdings in this case seem to primarily consist of USDT, according to the filing. The eventual return of funds to victims remains uncertain, as only a small portion of the affected individuals has been identified so far.
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