By the time that Vaughan grew to be a young man, he was a small unimposing figure who never weighed more than 130 pounds. But, pity the man who underestimated Vaughan, as he had learned to aim his six-guns with deadly accuracy. Moreover, he'd learned to drink with the same enthusiasm, which could often turn the average looking man into a quick-tempered, gun-toting hell-raiser.

Hank got into trouble for the first time at the age of 15. When a William Headspot refused to pay for a horse, the pair got into an argument and Vaughan ended up shooting the Headspot. While out on bail, he shot another man who had filed the original complaint. Promptly rearrested, he was taken to The Dulles jail to await trail. His family soon intervened pleading with the judge to allow young Hank to enlist in the Army rather than facing his punishment. The judge agreed and Vaughan was on his way to the Army. However, that didn’t last long with the imprudent young man, who was dishonorably discharged some 45 days later.

In the spring of 1865, Hank met up with a horse trader named Dan Burns and they decided to head to the gold fields of Idaho. Along the way, the pair stole a large herd of horses in Umatilla County, Oregon and were quickly pursued by Sheriff Frank Maddock and his deputy O.J. Hart. The lawmen discovered that the rustlers were camped near the Burnt River. Approaching the camp quietly in the early morning hours, they jerked the blankets off the sleeping men, telling them that they were under arrest. Both outlaws jumped up shooting. In the six-gun melee, Burns and Hart lay dead on the ground and both Maddock and Vaughan were wounded. Hank, fearing a larger posse might be on its way, escaped on horseback. However, he was caught several days later and taken to the Baker County Jail to stand trial.

Receiving a life sentence, Vaughan was sent to the new territorial prison in Salem, where he learned the skills of carpentry, bricklaying, black-smithing, as well as how to read and write. When his family intervened once again, he was pardoned by the Oregon governor in February, 1870.

Working with cattle and horses again, Hank set up shop at Toano, Nevada and was successful enough that he was able to purchase acreage near Elko. Acting ever the part of the gentleman, he was well liked around town and in May, 1875, he married Lois  McCarty, sister of the notorious McCarty brothers.