A judge on Thursday sentenced a Crystal Lake man, described as a “serial fraudster,” to nearly five years in federal prison after he pleaded guilty in an $8 million Ponzi scheme.
Alan J. Hanke, 61, of Crystal Lake, pleaded guilty in June 2024 to conspiracy to commit securities fraud for his role in misappropriating more than $8 million as part of a Ponzi scheme, according to the U.S. Attorney’s Office for the Eastern District of New York.
As part of his plea, Hanke also admitted that he filed a bankruptcy petition and documents in a bankruptcy proceeding to conceal the conspiracy.
Hanke, who faces up to five years in prison in the case, was indicted in February 2024.
“Hanke admitted today that he conspired to defraud clients of millions of dollars of their investments, and then tried to cover up his crime by declaring bankruptcy which was an intentional abuse of the U.S. Bankruptcy Court,” United States Attorney for the Eastern District of New York Breon Peace said last year following the plea.
“Today’s guilty plea reaffirms my Office’s efforts to root out white-collar crime where we find it and ensure integrity in the financial markets and the court system,” Peace said.
The indictment said that between November 2018 and August 2021, Hanke — the sole member of IOLO Capital (IOLO) — persuaded numerous investors, often in meetings in New York City, to invest in IOLO or related companies run by him.
Prosecutors said Hanke promised investors high returns within short periods of time by investing in, among other things, “standby letters of credit,” “medium-term notes,” and “high-yield bonds.”
He also assured investors that their investments would be insured against losses, prosecutors said. Nearly all the money that the victims invested with Hanke was not recovered.
Prosecutors said the bulk of the victims’ money went to Hanke’s personal expenses, including cruises, airfare, hotels, gambling expenses and a luxury car.
Hanke also paid co-conspirators and other investors with money that he wrongfully obtained during the scheme, prosecutors said.
Hanke filed a bankruptcy petition in June 2021 in which he sought to discharge the debts that he owed to his victims.
In the bankruptcy petition, Hanke disclosed that he received monthly Social Security disability payments but did not disclose the millions of dollars of income he received from his victims, prosecutors said.
Prosecutors said Hanke also did not disclose the proceeds from the sale of an airplane or that he used the proceeds for personal expenses, including gambling and repairs to a close relative’s home, as well as $180,000 that was withdrawn in cash.
Hanke successfully worked to have his sentencing hearing delayed multiple times in the case.
Hanke’s attorney, Michael Schneider, first sought the delay in sentencing after saying Hanke and his physicians were considering implanting a feeding tube into the man’s stomach in anticipation of him becoming unable to swallow due to a narrowing of his esophagus.
Schneider said Hanke was diagnosed with stage 4B squamous cell cancer of the oropharynx, which was treated aggressively with chemotherapy and radiation.
The treatment extended his life but left him with many serious physical problems that require constant surveillance and treatment, the attorney said.
“Mr. Hanke’s significant medical challenges and parlous physical condition ensure that any prison sentence imposed on him will not only be more punitive than the average defendant’s, but will also threaten his health, and perhaps his life,” Schneider argued in a sentencing memorandum where they asked for a non-incarceration sentence.
Schneider said in a new motion filed on March 11, just days before a rescheduled sentencing hearing, that he was seeking another delay in the hearing until after August 15.
The attorney said Hanke and his doctors decided it was necessary to insert a feeding tube into his stomach since it would soon be impossible for him to swallow nutrition.
Doctors also recommended that his gallbladder be removed. He was scheduled for the tube placement this past May and the surgery was likely to be scheduled 45 days after the tube insertion.
“An adjournment of sentencing is necessary to allow for the surgeries to be performed and for Mr. Hanke to learn how to receive nutrition through the tube prior to sentencing,” Schneider said.
Schneider said in an update in August that Hanke had recently been transported to the hospital by ambulance and found to have an abnormality in one of his carotid arteries.
Hanke has still not had the feeding tube inserted and he is currently scheduled to have the procedure on October 27 at Javon Bea Hospital in Rockford.
During a status hearing on September 4, U.S. District Court Judge Ramon Reyes Jr. set the case for sentencing on October 2 and directed Hanke’s attorney to provide his client’s updated medical records, including a post-operative care plan concerning his feeding tube.
The judge sentenced Hanke on Thursday to four and a half years in prison and ordered him to pay approximately $8.2 million in restitution.
Federal prosecutors called Hanke a “serial fraudster” who stole more than $8 million through a “brazen Ponzi scheme.”
In a sentencing memorandum, prosecutors sought 60 months in prison, which is the statutory maximum.
Federal prosecutors said in support of their request that Hanke has failed to pay restitution and continued to commit fraud. “Simply put, Hanke has not been deterred.”
In addition to the federal case, Hanke was charged in McHenry County Circuit Court in September 2024 with theft by deception over $10,000, a Class 2 felony, and fraud by use of debit or credit card, a Class 4 felony.
A criminal complaint filed in McHenry County Circuit Court said Hanke used a debit card belonging to Sons of The American Legion in McHenry without authorization.
Hanke, between January 2023 and March 2024, made cash withdrawals and purchases totaling over $10,000 with the card, the complaint said.
The complaint and prosecutors said the card was used at various restaurants and retail establishments, along with online websites, including Amazon, as well as a boat rental out of Florida.
Prosecutors said Hanke was the Sons of The American Legion commander and had access to the funds through his role.
A warrant was issued and Hanke was processed in the McHenry County Jail. He was later released from custody because the charges are not detainable under the state’s cashless bail law.
A judge ordered Hanke to have no contact with any member of the American Legion or Sons of The American Legion or any location of the two non-profit veteran organizations. He was also ordered not to hold office with any non-profit organization.
Court records show Hanke pleaded guilty on July 24 to one count of fraudulent use of a credit or debit card, a Class 4 felony, in exchange for his more serious charge being dismissed.
The plea was a blind plea and a sentence was not pre-determined. McHenry County Judge Tiffany Davis scheduled a sentencing hearing for Hanke for September 26.
In August, attorney Albert Wysocki, who is newly representing Hanke, filed a motion to have his client’s guilty plea withdrawn.
Wysocki said that Hanke’s guilty plea was entered under a “misapprehension of the law as well as a misapprehension of the facts, and further that there is doubt of the guilt of the accused…”
The attorney said that Hanke is seeking to have the case proceed to trial.
Wysocki said that Hanke’s previous attorney told the man that he had to plead guilty in the case or he would withdraw as his attorney.
“That the Defendant, since engaging his then Counsel of Record, repeatedly told Counsel that he was innocent of the charges in that he never had an intent to defraud The Sons of the American Legion or anyone else,” the motion said.
Wysocki also said that Hanke’s previous attorney never explained to Hanke the consequences of pleading guilty to the charge he pleaded guilty to and that the attorney disregarded numerous pertinent documents to aid in his defense.
“He was told by Counsel to just cooperate and answer affirmatively any questions that this Court would ask of him,” the motion said, referring to the day of the guilty plea.
A hearing on the motion was held in front of McHenry County Judge Tiffany Davis last week and the judge granted the motion despite prosecutors arguing against allowing Hanke to withdraw the plea.
Davis scheduled a status hearing for November 7 and a jury trial for January 26.