Crystal Lake man convicted in $8M Ponzi scheme admits to defrauding McHenry American Legion: ‘Betrayal’

A Crystal Lake man who is awaiting federal sentencing for an $8 million Ponzi scheme pleaded guilty in a McHenry County courtroom Thursday to fraudulent use of a debit card belonging to the McHenry American Legion.

Alan J. Hanke, 61, entered a guilty plea to using a credit or debit card with the intent to defraud, a Class 4 felony. It was a blind plea, meaning he won’t know what the punishment will be until a sentencing hearing that has been scheduled for Sept. 26. Hanke could receive probation or up to three years in prison on the conviction.

Hanke’s attorney said witnesses for defense and the state will testify at the sentencing hearing. Hanke had been set to go to trial Monday.

Hanke, who was commander at the McHenry-based Sons of the American Legion Squadron 491, giving him access to the funds at the time he committed the offenses, is accused of fraudulently using the legion’s debit card between January 2023 and March 2024, according to court records.

Hanke used the card to make cash withdrawals and pay for meals at restaurants, make purchases at retail stores and on Amazon, and to pay for boat rental in Florida, Assistant State’s Attorney Margaret O’Brien said in court Thursday. In exchange for Hanke’s plea, a charge of theft of property with a value between $10,000 and $100,000.

An investigation began in April 2024 when legion members noticed funds were missing or unaccounted for, O’Brien said.

In a letter to the court, members of the legion asked the judge for the maximum sentence.

“It is with great disappointment and a deep sense of betrayal that we report from the very first day of assuming the position of Commander of Detachment 491, [Hanke] deliberately and premeditatedly devised a plan to defraud our organization,” the letter stated. “These funds were not merely financial assets – they were earmarked for mission-critical support to our veterans and their families, including food pantry donations, transportation to VA medical appointments, essential home repairs, emergency clothing and more.”

In June 2024, Hanke pleaded guilty in a federal courtroom in New York to defrauding investors of more than $8 million. He also pleaded guilty to declaring bankruptcy in an attempt to conceal his crimes, according to the U.S. Attorney’s Office.

Hanke is set to appear in a New York courtroom Sept. 4 for sentencing on his federal case, for which prosecutors are seeking five years in prison, Breon Peace, U.S. Attorney for the Eastern District of New York, said Thursday. Hanke had been set for earlier sentencing hearings, but those were rescheduled because he was undergoing medical care related to complications from cancer treatment, court records show.

Hanke was arrested on the federal charges in January 2024 in Cape Canaveral, Florida, as he was boarding an international cruise, authorities said.

“As alleged, the victims trusted Hanke with millions of dollars for what they were assured would be safe investments,” Peace said in a news release. “In reality, the defendant deceived the victims and used their money to enrich himself with vacations and a luxury car, and then sought to abuse bankruptcy proceedings to shield his ill-gotten gains.”

In a memo to the federal judge who will sentence Hanke, Peace said the government also wants the court to order restitution and forfeiture, each in the amount of $8.2 million, to which Hanke agreed in his plea agreement. However, the federal prosecutor said, Hanke has “failed to pay any restitution or forfeiture and has failed to offer any assistance in locating the millions of dollars he misappropriated.” Peace alleges the money is being held in a bank overseas in someone else’s name.

Peace called Hanke “a serial fraudster” who “preyed on his victims – some of whom were unsophisticated investors," leaving some “financially devastated.”

Peace referred to Hanke’s charges in McHenry County and said Hanke used some of those stolen funds to buy airline tickets to New York to appear in court on his federal charges.

Hanke “continued to lie and steal,” and his actions show “a profound lack of respect for this proceeding and a failure to grasp the seriousness of his conduct,” Peace wrote.

Hanke’s attorney, Assistant Federal Defender Michael K. Schneider, declined comment.