JES Global Capital founder has been sentenced to eight years in prison for a $133 million fraud scheme that last year shook the subscription credit industry.
Smerling was also sentenced to three years supervised release.
The former PE manager pleaded guilty in February to one count each of securities and bank fraud charges. Smerling admitted that he forged subscription agreements from limited partners and audit letters attesting to his private equity firm’s finances. He also “falsified bank account statements” to obtain $133 million in credit lines from banks including Silicon Valley Bank.
The fraud exposed a potentially major flaw in the market’s due diligence system, forcing banks to revamp their processes to prevent similar incidents in the future.
The court in February fined Smerling $133.96 million, but during his sentencing, deferred its decision on the amount of restitution owed.
This article first appeared in affiliate publication Private Funds CFO