Podcast
Scam Inc 1: Pigs in a barrel
The EconomistJim Tucker, Shane Haynes, Bill Tucker, David, Su Lin Wong, Zannie Minton-Beddoes, Karina, Evan, Edgar, Sam Colbert, Alizé Jean-Baptiste, Weidong Lin, Darren Ng, Claire Reid, Rosie Blore, Heidi Pett, John Shields
- Event Trigger: In July 2023, Jim Tucker, a member of the board at Heartland Tri-State Bank in Elkhart, Kansas, discovered that $47.1 million—approximately one-third of the bank's total assets—had been transferred out.
- Funds were moved in discrete transactions to the cryptocurrency exchange Kraken between May and July 2023.
- The transfers were executed by the bank's CEO, Shane Haynes, without board approval or knowledge until discovered.
- Corporate Response: The board convened secretly at a farm to avoid panic in the small town of Elkhart (population ~2,000).
- Haynes initially claimed the funds were locked in overseas crypto investments and requested an additional $19 million to recover losses.
- The board unanimously rejected the plan to fund further investments; one director noted he was "not comfortable betting the farm."
- Regulatory Outcome: Federal and state regulators seized the bank shortly after the board meeting.
- The bank's charter was dissolved by a 92-year-old board member in a process described as one of the worst experiences of his life.
- Customer deposits were federally insured, but shareholders (local farmers and veterans) lost millions in capital.
- Causal Mechanism: Shane Haynes was identified as the victim of a "pig butchering" scam.
- Haynes had been manipulated over time into transferring bank funds to a fake investment platform masquerading as a crypto trade.
- Upon confrontation, Haynes admitted his mistake but attempted to secure more funds from the board, displaying a lack of concern regarding the legal consequences.
- Industry Context: The incident illustrates the rise of a global, dystopian criminal industry where scams rival the illicit drug trade in scale.
- In 2023 alone, Americans lost billions to these scams; the FBI estimates the actual figure is in the tens of billions.
- Modern scams no longer rely on typos or obvious lies but involve sophisticated "romance" or professional relationship building over months.
- Victim Case Study (Karina): A 46-year-old biotech PhD and triathlete lost $152,000 after being groomed on a dating app.
- The scammer, "Evan," built trust over months before guiding her to a lookalike Kraken Futures website.
- The scammer coerced her into borrowing against her retirement, taking personal loans, and borrowing from family to pay "fees" required to unlock frozen funds.
- Karina discovered the scam after realizing no account existed on the official Kraken exchange; the "Evan" persona was stolen from a gay man in Texas.
- Victim Case Study (Edgar): A Canadian software employee lost $78,000 via a non-romantic LinkedIn connection.
- The scammer, posing as a successful businesswoman, engaged him in professional chat before introducing a fake crypto trading platform.
- Unlike most victims, Edgar identified the scammers' internal team communications, revealing the professionalized nature of the operation.
- Future Scope: The report series "Scam Inc." aims to investigate the transnational networks behind these operations.
- Investigations will cover the movement of funds through cryptocurrency exchanges in locations like Thailand.
- The series intends to profile the scammers, corrupt politicians, and investigators involved in this $100+ billion global industry.