The Scam Even Bank Presidents Fall For

A farm bank failed because its president stole almost $50 million of its money. He sits in Leavenworth, convicted for embezzlement following a joint investigation of the FBI, FDIC, Federal Reserve and Federal Housing Finance Agency.

His name is Shan Hanes, former CEO of Heartland Tri-State Bank, late of Elkhart, Kan. As twisted as all this sounds – who knew the Federal Housing Finance Agency has its own cops? – Hanes didn’t keep any of that money. The real criminals have yet to be caught and probably never will be. Hanes, too was a victim – of an online scam called pig butchering, which we’ll explain in a moment. While this model has been in use since at least 2016, its pace exploded over the past couple of years and now accounts for around one-third of the $12.4 billion-per-year crypto fraud industry.
If this con job can put the chairman of the Kansas Bankers Association in stir for 24 years, maybe you should be forewarned against making the same mistakes.

Led to the slaughter

Pig butchering is a long-term scam in which the victim is gradually lured into making increasing contributions to a fraudulent scheme. These schemes usually take the form of romance scams or – as in Hanes’s case – investment frauds. The scammer often presents a way of making enormous returns on short-term positions in the cryptocurrency market. That’s the reason they make their pitch for digital tokens rather than – traceable – transfers of dollars. Of course, every bit of value on the blockchain originated as a penny of real-world money, so the people who fall for pig butchering absorb the cost of exchanging their dollars for bitcoin, ether, dogecoin or whatever.

No matter how much money you have, you’re not going to just hand over $50 million to someone who hasn’t established a level of trust with you – and that’s where online pig butchers “earn” their money. Like actual pig butchers, they fatten up their livestock before slaughtering them.

No longer content to snatch-and-grab a thousand bucks or so from someone dumb enough to believe they represent a Nigerian prince, the scammers now want to take their mark for every dollar he’s worth. And they’re willing to put in the time to build a relationship. (The description that follows is tailored to men, who make up the majority of this site’s readers, but women are targeted just as often.)

First, the scammer contacts you, apparently in error. You’ll get a text message on your phone or a direct message via Facebook or LinkedIn. If you respond, “sorry, wrong number,” you’ll get an abject apology accompanied by the photo of an attractive young woman. She will start a conversation about your favorite subject: you. Your hobbies, interests, vacation destinations and other personal information are probably all over your social media pages so, even if you never breathed a word of your Social Security number or mother’s maiden name, the scammer has some insight into what makes you unique.

And she – maybe a team of people identifying as one woman – will do all she can to make you feel special. She’ll text you first thing in the morning and right before bedtime. She’ll check in with you at work to see how your day is going. She’ll start calling you “sweetie” or “darling”. If you don’t fall for the obvious honey trap, she can still snare you. “I thought we were just friends,” she’ll say. “Would you feel better if we just talked about business?”

And she’ll patiently read every word you write about your work, engaging with a lot of questions as well as comments about how exciting it sounds. Then she’ll reciprocate by telling you what she does for a living: Trading cryptocurrency.

The long con

Somewhere along the line, she’ll convince you to switch to Telegram or WeChat or some other very private, hard-to-trace messaging platform.
She won’t ask for a penny at first but, once she has your trust, she’ll hit you up for a small influx of cash. Either she needs another $1,000 to complete a trade or, if you shared that you have a big bill coming due, she’ll tell you she knows a way that you can cover that expense with returns from a sure-fire crypto trade. Either way, she’ll walk you through the whole setup: creating a virtual wallet, transferring your dollars into crypto tokens, then trading those tokens on an exchange for futures on a different type of tokens.

It’ll all sound very confusing, but you’re tracking it on the exchange’s website, and you’ve made a 20% return in a minute. Under her tutelage, you keep making trades and keep getting these amazing results. So, you put more money in.

And more money. Soon, the kids’ college funds and your IRA are sucked in. It’s just a matter of time before you take out a home equity line of credit and a string of 0% introductory rate credit cards.

Maybe you never even had a Zoom call with her. She has so many excuses: She’s shy. Her conversational English is still at a low level. She has a stutter. But maybe you have seen her face-to-face onscreen. Sometimes fraud factories employ models, and it really is her picture she has shared with you – but she’s not the one you’ve been conversing with. More often, one of the women working that shift is taking the call, hiding her true face behind the filter of an exotic beauty.

But the numbers in your account on the crypto exchange’s website keep going up – so it must be legit, right? Sure, so long as the website is legit.
And that’s the trap right there. You might think you’re on a more-or-less aboveboard exchange such as Coinbase, Binance or Kraken, but you’re not. She directed you to a phony website mocked up to look like the major exchange. Those trades were never executed. Those returns were never realized. Every penny you put into that online Potemkin village is gone.
Before you figure that out, though, they’ll hit you up for another few thousand dollars in processing fees before they release your funds to you.

Where the money went

“The days of emails filled with typos offering an obviously fake get-rich-quick scheme are gone,” according to Sue-Lin Wong’s podcast for The Economist. “Shan Haynes had been ensnared by something far more sinister.

Your new friend is most likely part of what’s known as a fraud factory. The perpetrators are likely victims themselves, lured to travel internationally under false pretenses and forced to commit the fraud by a large-scale criminal enterprise, most frequently in Cambodia or Myanmar. The United Nations Human Rights Office estimates that hundreds of thousands of people have been trafficked for this purpose.

The principal beneficiaries are ethnic Chinese members of a network of “triads”. These are analogous in the west to the Italian Mafia but, where the Mafia is very much a top-down organization, the triads are a network of networks. This makes them even harder to contain and next to impossible to prosecute.

The scammers dealing directly with the victims might not be operating under their own volition, although some of them actually are. Either way, they can still be good at their jobs.

Protect yourself

Hanes never testified in court, nor has he given any interviews, so we might never know exactly how this played out in his particular case, but it likely followed the pig butchering script pretty closely. He wasn’t just a bank president. He volunteered as both a pastor at his church and a coach at his kids’ high school. This guy was a pillar of the community and, if he can succumb to a special blend of lust and greed, so can anyone – anyone reading this, anyone writing this.

If you get scammed, there’s paperwork you can fill out but, realistically, you’ll never claw back a dime of what you lost and you’ll likely have to set up a multiyear plan to pay back all the creditors you’ve acquired.

But we can protect ourselves. The U.S. Secret Service offers this advice:

• Shield yourself. Don’t respond at all to unsolicited messages, no matter how innocent they appear at first.
• Guard your personal information. Don’t put your financial information online, of course, but maybe you should consider sharing photos of your new Lexus or your vacation in Fiji.
• Slow down. Set personal boundaries with anyone you meet online or through messaging. A lot of pig butchering starts on dating apps so, if you’re on any of those, be particularly careful.
• Use caution. Block the connection as soon as they ask for money.

And maybe it would be a good idea to run any investment ideas by your advisor.