Hi, it’s Kiah. Before we get into this week’s newsletter, I wanted to clarify last week's piece about the Atlanta Fed. The Federal Reserve's centralized payment function is today known as the Federal Reserve Financial Services, which is the evolution of the 1990s Retail Payment Office. The Payments Forum at the Atlanta Fed provides thought leadership on emerging payments topics through research and collaboration with the industry. This includes two iconic studies: the Federal Reserve Payments Study and the Survey and Diary of Consumer Payment Choice, with the Federal Reserve Bank of Boston and Federal Reserve Financial Services.

This piece builds off a spicy specious argument I made on Breaking Banks Hot Takes recently about maybe doing a little bit of a crime as a treat. You don’t have to listen to it to read this, but they’re related topics and also, it was a fun talk!

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Why Bankers Don’t Go to Jail (Unless the Bank Fails)

Bank executives, I have noticed, are scared of going to jail due to their jobs. I think that’s pretty weird.

It’s not an uncommon refrain to hear bankers say some version of "We’re regulated, and we could go to jail for messing up." In some regards, this sentiment makes sense. Chartered financial institutions deal with other people’s money, public trust and deposit insurance. There are many, many laws they have to follow, and there are consequences if they don’t follow them. 

Even so, I have stopped believing that statement to be largely and broadly true. Instead, I feel like it’s reasonably defensible to argue, “Bankers don’t go to jail unless the bank fails.”

OK, of course: People who work at banks do go to jail without a bank failing, all the time. There are many ledger entries and signature lines within the document that underpin financial machinations that an employee could fudge. Sometimes, someone does fudge them — steals customer funds, forges a signature, ignores an appraisal, covers an overdraft, enters a phantom figure — for which they will go to jail and then receive a ban from employment in the financial services industry. 

But these are not employees you or I have heard of or remember. Those actions could be characterized as acute, clear, specific and limited misconduct. These are not situations or misconduct that become emblematic of anything that is significant in our industry. 

And those instances aren’t actually what a banker means when they say, “We’re regulated, and we could go to jail for messing up.” Instead, this phrase is uttered as a qualifier, explainer or in contrast. Slow to innovate? Compared to nonbanks financial companies? Well, this explains that!

The irony of being in financial media — especially starting your career in 2011 — is watching scandals and situations unfold for which no one goes to jail. A brief list:

• In 2012, HSBC Bank USA and its UK parent company forfeited $1.3 billion and paid $665 million in civil penalties as part of a deferred prosecution agreement with the U.S. Department of Justice for Bank Secrecy Act violations. Failing to implement proper controls allowed the bank to launder $881 million in drug proceeds. 

• In 2020, Wells Fargo & Co. agreed to pay $3 billion "to resolve [the bank’s] potential criminal and civil liability" for the 2016 fake account scandal. The bank faced other consequences, including changes in leadership, a series of fines and consent orders for other missteps and an unprecedented asset cap for almost a decade. 

• TD Bank, the 10th largest bank in the United States in 2024, and its holding company pleaded guilty to violations of the Bank Secrecy Act and money laundering in 2024; the bank paid a $1.8 billion penalty and the investigation is thought to have delayed approvals for the First Horizon Corp. acquisition. To date, there have been several indictments of branch-level employees for bribes and money laundering, but not middle or senior executives. The scandal accelerated the retirement of then-CEO Bharat Masrani, who saw his 2024 pay slashed by about 90%.

• No one, to date, has been charged for losing track of $60 million to $90 million of customer funds after Synapse Technologies company went into bankruptcy.

Some Bankers Who Did Go to Jail

Where did the impression that bankers go to jail come from, if they don’t these days? Well, they used to go to jail. In the wake of the savings and loan crisis, the U.S. Department of Justice sent 1,700 bankers to prison and obtained guilty verdicts in 2,603 cases spanning between 1988 and 1992. 

The number of prosecutions is a result of the 30,000 criminal referrals that federal banking agencies made to the government, said William Black, a now-retired law professor, a former bank regulator and the author of the book "The Best Way to Rob a Bank is to Own One," in a 2013 interview. The government had a 90% conviction rate, which Black said was "the greatest success against elite white-collar crime [in terms of prosecution] in history."

He said referrals from regulatory agencies are crucial for prosecutions, since prosecutors sometimes lack the specialist knowledge needed to prosecute these cases without assistance. During and after the S&L Crisis, regulators trained each other, as well as government agencies and assistant U.S. attorneys, on how to identify, respond to and document fraud schemes, Black said. Agencies also assigned their top examiners to the most complex fraud cases, and they worked with the FBI as internal experts.

Within those thousands of referrals was a list of the "100 worst fraud schemes" involving 300 savings and loan institutions and 600 individuals, "virtually all of which" were prosecuted, he said. This list of the 100 worst fraud schemes likely included iconic failures like the 1989 collapse of Lincoln Savings & Loan, the largest failure during the crisis, and the 1990 failure of CenTrust Bank.

Lincoln Savings & Loan Chairman and CEO Charles Keating Jr. ballooned the thrift’s assets from about $1 billion to about $5 billion through fictional assets or investments in junk bonds and other risky ventures. He also sought the intervention of five U.S. senators to whom he had donated, who met with the head of Lincoln Savings’ federal regulator; this intervention later caused a scandal for those five Congressmen. Keating was convicted and sentenced to 10 years in prison in 1991; he received a concurrent 12-year sentence in 1993. He was also forced to pay $156 million in fines. He served four and a half years before his conviction was overturned in 1996. 

In the case of CenTrust, the government alleged that Chairman and CEO David Paul used bank funds for personal purposes, including home improvements and yacht expenses. In 1993, Paul was convicted in federal court on 68 counts of tax fraud, obstruction of justice and misapplication of bank funds, and was sentenced to 11 years in prison, $60 million in restitution and a $5 million fine. He also pleaded guilty to 29 additional counts of securities violations and was released from prison in 2004.

Black contrasted those regulatory actions to the same agencies in the 2007-09 financial crisis, pointing out that the then-Office of Thrift Supervision, the Office of the Comptroller of the Currency and the Federal Reserve made zero criminal referrals. The administration of the Federal Deposit Insurance Corp. declined to answer the question, but Black said it was not thought that they made "any material" number of referrals. 

As a result, the only person in the United States to be held criminally liable for conduct during the 2007-09 financial crisis was Kareem Serageldin, the global head of structured credit trading at Credit Suisse. He was sentenced to 30 months for falsifying and mismarking the value of securities so they appeared to be more valuable. The judge in the case described his conduct as “a small piece of an overall evil climate within the bank and with many other banks.”

I do think executives do have a higher likelihood of going to jail if their institution fails. There are a couple of reasons for this, including that nearly 40% of bank failures show signs of material insider abuse and internal fraud. Postmortem, the FDIC has a clear mandate to recoup insurance fund losses, access to the institution and investigative resources. It can use civil court to seek recourse, as it did with IndyMac Bank. In 2012, the FDIC won a judgment of $168.8 million against three executives of the failed IndyMac as part of a directors and officers’ lawsuit in civil court. It sued former CEO Michael Perry, who agreed to settle the civil claim for $1 million personally and $11 million from insurers; he also consented to an industry ban. 

Another amplifier of this theory is bank size: There are fewer employees at smaller banks. The CEO at a community bank may be the person who signs off on credit decisions or advances from the Federal Home Loan Bank. Once the bank fails, it’s more straightforward to hold them accountable for this conduct and the subsequent failure of the bank. 

In Good Company

I’m not alone in this opinion. Jason Mikula, publisher of the independent newsletter Fintech Business Weekly, has made a name for himself chronicling developments in the banking and fintech space, including innovations and expediencies that sometimes have whiffs of illegality. He’s also my friend! I asked him for his perception and thoughts on the claim "bankers go to jail," given this theme in his coverage.

"It feels like a sound bite — it’s not reality," he said. "It's an intellectually lazy analysis."

It’s one thing, he said, if someone is discussing the case of Shan Hanes, the CEO of Heartland Tri-State Bank, who fell victim to a crypto scam and stole bank capital to send to the scammers. But in the same context and situations I’m thinking of: A bank saying it can’t innovate — be it banking as a service, stablecoin, cannabis or crypto — because someone might go to jail? He doesn’t buy that explanation.

One reason why is that Jason has chronicled a surprising amount of conduct that has yet to face criminal charges. He listed off the saga of the bankruptcy of Synapse Technologies and the missing millions of end-user funds, the lawsuit between Solid and its investors over revenue misrepresentations and Kontigo’s sanctions evasion as recent examples. (We have separately discussed members of the "Fraud 30 Under 30," including founders who have been criminally charged for misrepresenting revenue to investors.) He thinks zero of the individuals connected to these — and any stories he’s covered — have been charged with criminal conduct, and zero have gone to jail. Not just the bank executives. No one!

At the same time, his thought process has evolved to better appreciate the realities of investigations. "There are real resource constraints. … The sheer volume of criminal and civil wrongdoing versus what captures the awareness of the regulatory enforcement [groups]. … Then it has to be big enough or important enough to justify allocating resources against it."

There’s maybe a sweet spot, Jason hypothesized: A dollar range where the losses or impact are large enough to merit investigative resources, but not so big that it sprawls into a conspiracy that diffuses criminal intent and responsibility. Big enough to justify but small enough to win the case. 

"If we wanted to be charitable, we could say 'Those things take time' or ‘White collar crime is complicated,'" he said. Indeed, in the case of Synapse, Jason reported back in September 2025 that the FBI and the U.S. Attorney’s Office for the Southern District of New York were still investigating matters related to the bankruptcy. 

"But for all intents and purposes, there are no public-facing consequences," he said about his reporting. "Not for the company, not for the banks, not for the VCs."

Where bankers are cautious and regulators and investigators are methodical and slow, I think Jason and I are cynical but realistic. This feels bad! It means that there is a lot of conduct that isn’t alleged or charged as a crime that still erodes trust in the financial services system and harms people. Jason has earned a reputation for his investigative reporting and spends a lot of time diligently reporting on shocking stories for our weekly consumption. (Become a paid subscriber if you’re not already.) It’s got to be hard to see so little in the way of consequences.

It can definitely be frustrating. You see all this bad shit happening, but there's seemingly no accountability from the places that you would hope there would be some level of accountability — criminal law enforcement or at least civil enforcement from a bank regulatory perspective," he said. "All I can do, in the role that I have, is document and publicize."

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FROM THE VAULT

What’s on my mind and filling my time:

💌 Charmed by: this comment letter to the U.S. Securities and Exchange Commission from /r/Wallstreetbets on the proposed change in the cadence of public filings. "Many of us learned what a 10-Q was the hard way, which is to say we bought a stock, watched it fall 40% on an earnings release, and then read the filing to find out why. That is a stupid order of operations and we acknowledge it. But it is also the entire mechanism by which a generation of retail investors taught itself to read financial statements, and the Commission is now proposing to cut that mechanism in half."
That’s part of the education of bank reporters, too.

🏨 Reeling from the news: that a nightly rate of $300 for a hotel is considered cheap in this Bloomberg quiz about the flattening of hotel decor. I long for the day I do not sort hotels in a city by "price: lowest to highest." Oh also I went 1 for 3 on all the quizzes.

🎙️ On Bank Nerd Corner: I chat with DJ Seeterlin, chief innovation and strategy officer at Chesapeake Bank, about what Trader Joe’s can teach banks about strategy and execution.

🛫 Catch Me At: the Open Banker Salon this week in Washington.

Thanks for reading! Let me know your thoughts on this piece, or other bankers that went to jail.