Kansas-based now-failed Heartland Tri-State Bank’s former head has pled guilty on Thursday for embezzling $47.1 million for a series of “personal crypto purchases.”

This led to the bank’s failure in July 2023, at a complete loss of equity for investors, the U.S. Attorney’s Office for the District of Kansas noted.

Shan Hanes, 52, who served as the CEO of the bank, purportedly orchestrated crypto schemes to cover the bank’s losses. He was squandering away tens of millions of dollars in cryptocurrency, the court order noted.

“Shan Hanes is a liar and a master manipulator who caused Heartland Tri-State Bank to collapse,” said Attorney Kate Brubacher.

“Many victims will never fully recoup losses to their life savings and retirement funds. But at least, we at the Department of Justice can see that Hanes is held criminally responsible for his actions.”

The FBI, Federal Deposit Insurance Corporation, Federal Reserve Board and Federal Housing Finance Agency are currently investigating the crypto case.

Hanes would receive a maximum of 30 years in prison and will face sentencing on August 8.

Bank Collapse and Crypto Connections

The involvement of a number of recently failed banks including Signature, SVB and Silvergate, rippled effects into the crypto sector. Failed bank’s exposure to crypto adds to the debate over the appropriate relationship between the banks and the crypto ecosystem.

Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank all provided banking services to cryptocurrency firms in the form of holding the deposits of, or making loans to, crypto firms.

In February 2023, the Fed issued a joint statement highlighting liquidity risks to banks serving crypto organizations. It warned banking organizations to apply existing risk management principles to manage those risks.