The problem isn't so much "falling for the scam", as "stealing from the bank".
Even if, for example, you find a loophole that allows you to make 100% guaranteed money, the deposits of the bank belong to the bank, they are not the personal funds of the CEO.
Like, putting money in treasuries is basically 100% safe. It's fine for the bank to put the money in treasuries and profit. It's highly illegal for the bank CEO to take 20 million from the bank, use it as personal funds, buy personal treasuries, and then put the money back.
The title makes it sound like the problem was that he was an idiot and fell for a scam. The true problem was that he misappropriated bank funds in the process of doing so... and if there's any one person you should expect to understand that line, it would be the CEO of a company (or I guess CFO if you have to pick one, but if you pick two it's CFO and CEO)
The headline “CEO of very small bank gets 24 years for embezzlement” would get a lot less clicks, and almost certainly would not have ended up on the front page of Hacker News.
The fact that he was fooled into pouring it all into a crypto scam is kinda the interesting part of the story.
OP was not referring to the headline, but the general narrative. Have a clickbait headline if you will, but in the article have that thoughtful perspective.
The scam is relevant because that was what motivated him to do the illegal things. If the payoff was only treasury level interest, he (hopefully) wouldn't have been motivated to risk being caught for embezzlement.
This also reminds of how an employee single-handedly brought down UK's second oldest merchant bank at the time, by speculative trading: https://en.m.wikipedia.org/wiki/Nick_Leeson
This makes me wonder about the trader working for a French bank who supposedly traded too much after bypassing the limits because he understood how to edit the Visual Basic Script macros in Excel...
But Googling and DDGing "french bank collapse visual basic" didn't get me the story, but it got me results about SVB (Silicon Valley Bank) collapse. Why do I have the feeling the super-clever algorithms saw that Visual Basic is shortened to VB, and thought "Oh 'VB' is in 'SVB', he's asking about a bank, results about SVB must be relevant to this query!"
He was a middle office worker, in security/admin, where he verified then authorized big trades. He used his excel and VB skills to impress a front office manager and get a place in the front office as a market maker (I think he has been assistant analyst in between the two job, but that isn't relevant).
Société Générale used the same id / email adresses for him after he changed jobs, and since the user management was lacking (and wasn't audited), he was allowed to make huge trades as a MM, and authorize his own trade as an ex-security/admin guy.
I might be wrong about his exact job title in the middle office, but I 100% guaranty you the rest.
When I don't get something useful with search terms, I often try to ask AI like ChatGPT:
> One famous case that somewhat aligns with this is the Société Générale trading scandal involving Jérôme Kerviel. Kerviel, a former trader at Société Générale, used his knowledge of the bank's systems to make unauthorized trades worth billions of euros, though it was more complex than just modifying a VB script in Excel.
It's interesting because when I do anything like that I don't look at the language information in the AI response.
Yours is a good example. All I'm looking for is the key names that would enable me to actually get the real information without AI repackaging, which I assume to be flawed.
I agree with you on that. In ChatGPT's answer, for me only names and keywords are relevant, which I can then use to start another search, and I ignore the rest of the “noise”. I was also more trying to show with my post that I occasionally use A.I. when I can only vaguely remember something and thus am not even sure what the right search terms for a classic web search would be. Like humans, ChatGPT is often able to extract the right information from imprecise, anecdotal messages and then provide suitable answers that I can then use for my further search.
Or this one:"Foutanga Babani Sissoko, known as Baba Sora (died March 2021)[1] was a Malian entrepreneur and politician. Sissoko was a member of the National Assembly between 2002 and 2014.
He was born in the village of Dabia, to the west of Mali's capital, Bamako. Little is known of Sissoko's early life.[2]
He was said to have swindled the Dubai Islamic Bank for US$242 million using claims he could perform black magic, a claim he denied saying he only went into the bank to receive a car loan'
"Journalists" now love to use a sequence of events and then present them like a causal narrative, ignoring the real reason the final event happened. I'm so freaking sick of it.
“Ex-bank CEO gets 24 years after embezzling bank funds”, 5% clickthrough rate.
“Ex-bank CEO gets 24 years after falling for crypto scam”, 50% clickthrough rate.
That’s why “journalists” use these scaremongering titles for nothing burgers.
Also, lots of “journalists” these days hide behind “I didn’t write the title, my editor/whatever did”. Well, I see you on the byline and don’t see you resigning, so I’ll hold you responsible.
As a journalist myself, I’m going to defend the article writers here. I’ve had heated discussions with editors about not changing my titles or words, and how I’d rather they didn’t run it and simply not pay me (I’m freelance)
And then it prints with my name and a ton of changes I never saw. Words I have never used, implications added. Its frustrating but I don’t think there is much I can do
I don't understand why you think the story is a "nothing burger". The crypto scam is part of what makes the story unique and interesting, and is certainly relevant. Your first headline would miss this completely. Would you be happier if it read, "Ex-bank CEO gets 24 years after embezzling bank funds to pay for crypto scam"?
> Journalists" now love to use a sequence of events and then present them like a causal narrative, ignoring the real reason the final event happened. I'm so freaking sick of it.
When was journalism, writing, or any sort of story-telling not done this way? Is the alternative a series of time stamped actions?
"Falling for a crypto scam" doesn't really do it justice. He appears to have been under a spell of insanity and committing various crimes. Although how the bank was in a situation where one man could pilfer funds like that seems like a questionable aspect, surely there were other bank employees who should have been aware of and preventing the madness. It is hard to see this happening and everyone around him agreeing that the CEO was competent for the role.
He used his authority at the bank to induce bank employees under him to break the banks own rules and policies. I do wonder if some of them suspected but decided to give their idiot boss enough rope to hang himself with...
I don't know about you, but if the CEO came to me and said "send all the money to my bank account" [0] at most companies I'd expect there to be a policy where I check that the CFO at least knows about it. Maybe informally send him a Slack message even. CEOs aren't gods, there are limits on what they can do.
It seems a bit wild that this wouldn't be immediately picked up by the executive team, payments halted and the CEO fired over the course of 4-8 hours. So quickly that there is basically no crime and nothing to prosecute. This crime was exactly the sort of things banks are designed not to do.
[0] In this case it was a couple of payments, but sending bank money to a private account is a red flag. We're talking blood red, rose red, angry-bull red red flags. It isn't a minor request.
You might not make such a transfer - but the CEO can choose which of your colleagues he approaches.
So he doesn't go to the conscientious, rule-following guy with a stick up his ass. He goes to someone so junior they don't know better. Or someone who's flattered to get the CEO's direct attention and to be trusted and included on a secret project. Or someone trusting that the CEO gets on well with. Or someone who thinks producing results and cutting through red tape will show the CEO their potential as an executive.
And if the first person he approaches says there are forms to fill in he takes the forms, thanks them, and asks someone else the next day.
> So quickly that there is basically no crime and nothing to prosecute.
But what if you hate your boss? I think a lot of people might do as their boss says if he's an asshole and they realize he's going to land in prison if they go along with his orders.
I don't know. I'd be afraid of being liable if I just blindly follow orders; that doesn't seem like an excuse. What if I get accused of being an accomplice?
Yes, if one knows the order is illegal, one definitely commits a crime as well.
Even not being aware, can make you a accomplice, but you might get away if it was not obvious.
But if it is obvious - and workers of a bank should obviously know at least some laws - following such orders would be just stupid.
They did do it though, and haven't been prosecuted. Having evidence of being manipulated by your boss seems to be a pretty good excuse. If they knew their boss was up to some shit but did it anyway, and stick to their story of being naively manipulated, they're almost certainly in the clear.
Early on my career my employer (a savings and loan) went into receivership because our CEO kept reselling a parcel of land at increasingly inflated prices to himself through holding companies he owned. Each time he was able to force a sale through and a loan to backup the sale by telling employees to just do it. Sadly it was so long ago and something similar has happened so many times since I can't find anything on how much jail time he received. Just a set of stories about bank ceos getting jail time repeated by different news outlets.
>He appears to have been under a spell of insanity and committing various crimes.
My close relative committed similar crimes in similar circumstances but at a much smaller scale. “Appears under the spell” describes what I saw very well. I think people who get into such situations are ill and do not control their actions, like a drug addict, alcoholic or a pathological gambler.
25 year sentence does some justice but it won’t stop these people because they are not capable of understanding what they do and what consequences they cause.
> Because the bank was insured by the Federal Deposit Insurance Corporation (FDIC), the FDIC "absorbed the $47.1 million loss"
> Right now, it's unclear how or when victims will be repaid for losses. Broomes ordered "that restitution be finalized at a separate hearing within the next 90 days," the US Attorney's Office said. Many victims will never fully recoup losses to their life savings and retirement funds
Can someone explain how are these two statements compatible?
I think the losses by people who deposited money in the bank are covered but when the bank collapsed the bank investors lost a further 9m$, the investors are not covered by FDIC insurance
There were other victims who were not insured by the FDIC because he stole from their non-bank funds: “After blowing through his own funds seeking promised profits, Hanes stole tens of thousands from a local church, then a local investor club, and finally his daughter's college fund, NBC News reported.”
The victims are the shareholders who were wiped out when the bank went under. The FDIC made the depositors whole, but not the other parts of the bank's capital structure.
Isn’t the headline a little click-baity? He got 24 years because of embezzlement. Sure it was because he fell for a crypto scam, but he stole the money…
Maybe it’s just me, but I was thinking he did it by accident.
> After he asked for a $12 million loan from a neighbor, Brian Mitchell, his neighbor detected the scam and refused to lend the money.
Who asks their neighbors for $12 million? The dude was out of his mind. 24 years seems long but at the same time somewhat deserved given his role and the amount of damage his sheer stupidity inflicted.
Roger the Car Salesman: My name's Roger, sir. May I be of some help?
Memphis: That's funny, my name's Roger... Two Rogers don't make a right.
[laughs]
Memphis: Roger, I have a problem...
Roger the Car Salesman: Yes?
Memphis: I've been in L.A. for three months now. I have money, I have taste. But I'm not on anybody's "A" list, and Saturday night is the loneliest night for the week for me.
Roger the Car Salesman: Well, a Ferrari would certainly change that.
Memphis: Perhaps, mmm. But, you know, this is the one. Yes, yes yes... I saw three of these parked outside the local Starbucks this morning, which tells me only one thing. There's too many self-Indulgent wieners in this city with too much bloody money! Now, if I was driving a 1967 275 GTB four-cam...
Roger the Car Salesman: You would not be a self-indulgent wiener, sir... You'd be a connoisseur.
Memphis: Precisely. Champagne would fall from the heavens. Doors would open. Velvet ropes would part.
I think this person and its neighbors are just living in a different world. A world where a million is similar to what us is a grant or something.
He didn't get 24 hears for falling for a crypto scam. He got 24 years for embezzling money. It was just his stupidity that got himself cammed out of the embezzled money. He'd be in prison even if he had made a hefty profit with the proceeds.
> Because the bank was insured by the Federal Deposit Insurance Corporation (FDIC), the FDIC "absorbed the $47.1 million loss" after "Hanes’ fraudulent actions caused HTSB to fail and the bank investors to lose $9 million," the US Attorney's Office said. On top of those losses, Hanes' fraudulent actions caused "catastrophic losses to bank customers who relied on the bank for the safekeeping of their savings," the press release confirmed.
Thank goodness for the FDIC here. A win for "big government."
If anybody thinks this is too harsh a punishment for being a retard who fell for an obvious scam, note that he wasn't merely a retard but a thief as well. If he had only given the scammer his own money he wouldn't be faced with this prison time, but the absolute idiot went and stole other people's money and gave it to the scammer.
The article claims the bank's losses were insured by the federal government, yet it closes by saying some people that banked there are having financial trouble.
How's this work? Aren't the bank's losses essentially people's deposits? Where'd the insurance money go then, or has it simply not yet been paid out?
FDIC ensures certain deposits, within limits. If the bank fails, which is my superficial understanding here, FDIC will make you whole if you had a secured deposit within those limits, although not instantly, but it doesn't cover deposits either beyond those limits or which were never guaranteed. A typical high street bank account is always covered, but maybe you've put the $1.5M Grandma left you in there, that's too much, or maybe instead of the normal bank account you obtained some weird investment vehicle that's not technically a bank account but, you know, it's from a bank - well, the paperwork did say "Not FDIC insured" and sure enough it isn't FDIC insured so if the bank fails too bad.
In most bank failures a large fraction of the money is eventually recovered but it takes ages. Maybe you had $1M with a bank, the bank fails on Monday, $250k is FDIC insured, on Monday you can't get your money, this can be very disruptive. Can't make car payment, can't pay tuition, whatever. But hey by first thing Wednesday FDIC gives you access to $250k.
Six months later the people cleaning up the mess maybe give you $607 283 from selling the bulk of the bank's assets, and then six years later, when you've almost forgotten this disaster, you get a letter with a further $114 384.10 as the last bits and pieces were settled, and it turns out one of the hard to unwind bank investments was actually quite profitable, although it was supposed to pay much earlier. Congratulations, the vast majority of your money was "recovered". Not all of it, and not quickly, but bank failures generally do not mean there's an empty vault.
I understand that, except the reported insured amount matches the reported amount of money lost in the scam, so as much as it adds up, it doesn't square with the rest of the article.
Apparently, it takes some time until the money is paid out.
From the article:
> Right now, it's unclear how or when victims will be repaid for losses. Broomes ordered "that restitution be finalized at a separate hearing within the next 90 days," the US Attorney's Office said.
The FDIC insures deposit accounts (savings, checking, money market deposit accounts, and certificates of deposit) only and there’s a cap of $250K at any single institution. I’ve no idea what accounts this bank offered, but anything in excess of that cap or held in, for example, mutual funds, stocks, etc are uninsured losses. Those people the article mentioned specifically called out retirement savings, so they very well may not have been in insured deposit accounts.
I replied elsewhere but he didn’t just steal from the bank: “ After blowing through his own funds seeking promised profits, Hanes stole tens of thousands from a local church, then a local investor club, and finally his daughter's college fund, NBC News reported.”
>Three days later he directed two wire transfers totaling $6.7 million to be sent by the bank to the crypto wallet, and a whopping $10 million less than two weeks later, and another $3.3 million days afterward.
that's gold medal scamming right there. Almost unbelievable
Indeed, yet these scam gangs (often whole office buildings filled) are popping up like weeds, and there's nothing here about trying to catch the scam gang. Is it even illegal, it must be fraud, at least.
When something sounds so outrageous, you have to wonder what the full story is.
It can't be as simple as the article suggests.
A bank CEO would have a solid understanding of debt and interest. I suspect he must have seen a legitimate opportunity but he didn't account for the human side of the equation that the crypto would be a rug pull.
Assuming you control a bank to such extent, you could potentially keep up a scheme going forever provided that you leave enough safety margins for interest rate increases.
I bet there are people running such schemes and getting away with them as we speak.
For example, you can loan money to someone you trust to buy crypto assets, if you and your friends hold most of the coins, you can achieve essentially any market cap you want... For example, you can spend $1000 a day to buy 1000 coins per day from your friend... You can move those newly purchased tokens back and forth 1000 times between different accounts so that your trading volume hits like $1 million per day. If you have 1 billion coins in circulation, your crypto's market cap is now $1 billion dollar... Becoming a billionaire on paper is easy!
It's basically the same thing that happens with stock markets except that the stock market involves more participants.
If you don't believe that this can work, consider that this is exactly how the banking system at large operates. It keeps borrowing new, increasing amounts of money into existence to pay back the old debts, using the inflating nominal value of collateral to justify the increasing size of the new loans. Literally the only difference is that in that case, it involves many real people moving money in a circle instead of one person moving money in a circle.
Yes sure, watching Netflix and killing people by accident is bad. But embezzling this amount of money has surely had very bad consequences for the affected people? And it was done on purpose!
It makes sense to me he gets five times the prison time...
The criminal negligence of watching Netflix while driving wasn't an accident though... 5 years does seem very low, but I guess I'm not surprised given it happened in Canada.
Even if, for example, you find a loophole that allows you to make 100% guaranteed money, the deposits of the bank belong to the bank, they are not the personal funds of the CEO.
Like, putting money in treasuries is basically 100% safe. It's fine for the bank to put the money in treasuries and profit. It's highly illegal for the bank CEO to take 20 million from the bank, use it as personal funds, buy personal treasuries, and then put the money back.
The title makes it sound like the problem was that he was an idiot and fell for a scam. The true problem was that he misappropriated bank funds in the process of doing so... and if there's any one person you should expect to understand that line, it would be the CEO of a company (or I guess CFO if you have to pick one, but if you pick two it's CFO and CEO)