A cryptocurrency scam that turned a small town against itself

... although embezzlement-style crimes are very, very common

And the unimpeachable accountability of cryptocurrency ledgers means .. an epidemic of fraud

The general mechanism to prevent abuse is that the person giving the order is distinct from the person performing the action. This ensures that a second set of eyes inspects the order and notes any inconsistencies. Such a control was lacking in this case.

The CEO can give orders, but there should be literally no way for a single person to transfer that much money without approval.

Even our accounting system is integrated with a vendor management platform that first verifies the recipient is a known vendor, and tied to the banking part that actually issues an ACH/wire transfer such that it can't happen until approved.

The fact that there's essentially zero governance at a bank is unacceptable.

> but I can't think of a system of controls that ends up with the CEO not being able to give orders unilaterally most of the time

The primary system of control for small shops is going out of business when you're dumb enough to lose $47M and getting replaced by more competent people running the competition

> networking

reminds me of a time I went to an event on meetup, I think I made a new friend so we meet up later together at a coffee shop he starts asking me what I know about marketing... I'm like no way... is this (makes a pyramid shape with my hands) guy stops talking

Why I've not been scammed. Why I'm not successful.

A good saying I heard a while ago was “you don’t get scammed because you’re stupid, you get scammed because you’re human”.

These scammers aren’t random individuals, they’re business that invest a lot of time and energy into working out how to scam people. They’re professionals targeting amateurs.

Yeah, not that I think I'm all that exceptional, but I've realized that truly astronomically successful people are separated from me as much by risk tolerance and a frankly short-sighted-seeming commitment to a single goal as by talent or skill. Survivorship bias sometimes makes me wish I was willing to risk it all on a bad bet too, but a sober look at the typical result of that approach makes me glad I'm not.

A lot of this rings true for me. Myself and maybe 40 other individuals all participated in what now in retrospect was an obvious Ponzi scheme - see SEC vs. Shavers (0)

I even have IRC transcripts to this day where I would ask the dude “this isn’t a scam right?” and I would be reassured until the next day and I’d think about it more, ask more questions and then deposit more damn monies! The greed will subvert all logic if the daily vig is high enough. Or it did to me and I learned an extremely valuable and costly lesson.

Don’t be greedy. Anything that’s too good to be true in investment terms is exactly that: too good to be true. Anyone that can pay 1% interest daily doesn’t need your money. In retrospect it’s obvious and some of the people participating back then were screaming “ponzi” while depositing more and more possibly trying to break it to prove the point. Eventually it got too big and broke.

“Break it to prove a point” would be an accurate description of your average Bitcoin dweeb in 2012-2014 or so. I spent considerable time Sybil attacking and dusting every namecoin address I could at one point. Not for any specific reason just because I could.

After the smoke cleared I punished myself for years, volunteering for things I had no business getting involved in. I hated that I allowed myself to be scammed but it was a multi-year “friendship” that developed pseudo-anonymously over IRC. I don’t make new friends on the internet anymore because I can’t verify authenticity or identity these days unless I can touch you and see you.

Back then it was $7500 I didn’t actually work to earn and I was just letting it ride for 1% interest daily, compounded. I was famously asked on IRC how much I lost and my answer was and still is “more than car, less than a house” - not an attempt to minimize it but to quantify it.

Trendon did his 18 months and if he’s reading this - Yo dawg please stop skipping out on your apartment rent and stay out of small claims court bro, seriously grow tf up.

(0) https://www.sec.gov/enforcement-litigation/litigation-releas...

Court transcript is a wild read if you can find it. Bitcoin is possibly money today because of this case (and by extension, my actions) was filed in Texas where this guy wiped his AWS account, stonewalled both the SEC and FBI on discovery and attempted the defense “Bitcoin isn’t money, I did nothing illegal”

That defense didn’t work.

In any case the parent comment rings true:

-Escalation of trust -Pushing boundaries to find if they exist -Friend-like communication in what should be a business relationship -Trust networks and/or referrals to participate -“sold out” “sorry not accepting new customers” are the best “For Sale” advertisements -Betting bigger or digging a deeper hole

I went off script a bit here, apologies, but the comment triggered a brain dump. People get scammed for different reasons.

>A lot of businesses operate on trust networks at some level.

100% this. No one is immune. Not even "savvy tech people;" Theranos and FTX were similar affinity frauds (https://en.wikipedia.org/wiki/Affinity_fraud) commited against Silicon Valley old-money and VC circles, respectively.

> I am sure he "saw" real returns on a very real looking app or website.

Exactly: "Hanes told Mitchell a confusing story. Not long ago, Hanes explained, he started investing in cryptocurrencies with the help of some people he met online. First, he and his partners deposited money on a reputable U.S. platform for buying and selling crypto. The profits were enormous, he said: He took out his phone to show Mitchell his account balance, which seemed to indicate that the investment was worth $40 million."

There is a difference between seeing numbers go up on an app, and getting money into an actual bank that you know to be real.

The fact that you're even arguing this point shows how easy it is for people to fall for this crap.

Anyone can make a real looking app that makes it look like you're making money when they've already stolen all your money and spent it on hookers and coke on yachts.

Not anyone can start a real bank in the US, and if they can, you generally have protections in place to not need to worry the bank is that egregiously fraudulent.

I think younger investors know and understand that the market can fall, but this is still different than having lived through the market falling and how dramatic that can be.

> I think is priming young or naive investors to believe investments never fail.

Investments fail, there are plenty in the news. Broad market indices, however, don’t fail. There have been numerous bailouts over the previous decades. Why would one assume any future government wouldn’t continue bailouts if all the previous ones did?

It's also a more poignant tale of a small, community where (thanks, Internet!) international grifters could nonetheless inject themselves.

Or, more cynically, this guy was destined to be scammed and the internet in short order put him to the test. One has to think though that if it were a local scammer we would not be talking tens of millions of dollars.

The article talks about him being persuaded by persons "met on the internet" to "invest" in "crypto". There is absolutely no scenario in which an attractive woman sends you a LinkedIn message with the intent of getting you to make legitimate - albeit leveraged - crypto investments.

A recent post from a crypto reporter gave a good write up of how he almost got himself scammed [1]. It sounds like it followed the exact same script, even down to the Aunt with a crypto trading firm. The lengths that the scammers went to in order to prepare him for the scam was impressive. It gives some personal insight into how even those who should know better find themselves involved.

[1] https://unchainedcrypto.com/how-i-almost-got-slaughtered-in-...

> People fall for scams all the time, and as a society, we are failing to educate them with the sense to sniff them out.

IDK. It's one thing to fall for a scam and lose all your money. It's another thing to, after all that, go to your board of directors, ask permission to invest bank money in the scam, and when they say "We don't feel comfortable with this" tell them "Too late, I already invested the company's money in this for you." This is not a financially illiterate person, but someone who seemingly knew he needed board approval for an investment at scale, yet simultaneously ignored it and assumed he would be given it when asking retroactively.

There's a great many other failures of control here, like staff disobeying policy when he told them to. And perhaps it's my family history speaking here, but I suspect this guy has an undiagnosed mental illness (bipolar?).

Agree with your points. But I think we're unlikely to see tens of millions of dollars in an Amway, Herbalife hustle.

> People fall for scams all the time, and as a society, we are failing to educate them with the sense to sniff them out.

One of the companies I work with recently started looking at partnering with this company: https://scamnetic.com/

I like the idea of providing better education about scams to consumers, but this company gives me some pretty weird vibes. I wonder if we're on the cusp of another security theater boom similar to the plethora of companies that sprung up around identity theft and mostly seemed to exist to allow companies to mitigate any responsibility for their poor data and security practices.

This exactly. And Crypto's biggest "innovation" by far was giving us an entirely new unregulated financial market with zero consumer protections that included, as a bonus, the trappings and added complexity of software and let con men the world over dust off every money scheme from the last hundred years and do a fresh round.

Edit: Further, "education" shouldn't even be a factor here. You should not need to protect yourself from being scammed. Taking advantage of people's trust and stealing their money should be illegal, the offenders should be punished, and the victims made whole. There is no reason in a civilized society to permit financial crimes, which is what this shit is. Stealing is fucking stealing, whether you take something from a store, whether a bank issues bullshit fees, whether an employer doesn't pay fair wages, whether a con man tricks you into buying ape pictures.

The fact that a decade previously in 2011, Hanes had been found to push a bunch of questionable loans, was fired, but then a year later was back in as president shows that he probably just got greedy.

Well done Thailand. They need to free the slaves in the rest of Myanmar, Laos and Cambodia now. (guardian article https://www.theguardian.com/world/2025/feb/19/myanmar-scam-c...).

The others are trickier as the government officials get paid off but it Thailand, China and Vietnam said free them or we close the border it would put a fair bit of pressure.

The all-American dream success story "A part-time preacher at a local church, Hanes embodied a certain small-town ideal: He lived in a nice house with his wife and three daughters and volunteered at high school football games."

Testing the waters "Hanes was eventually fired for reasons that remain in dispute"

Hubris works "Hanes assembled a group of local investors who started a bid to buy the bank and restore control"

Self-immolation where the lies stop working "After draining his personal savings, Hanes began stealing — from his local investment club, from his church and finally from the bank."

And, as you note above, the conman still has his defenders ready to open their hearts (and probably checkbooks!) for another round.

agreed on all accounts

He was a thief that stole people's life savings.

He was used by more successful thieves. He is still responsible for his actions

I feel terribly sad for him, a tragedy for him and his. But he choose to steal

Those technologies offered actual utility, that's the difference.