CEO of Private Equity Fund Guilty of $140 Million Bank Fraud

CEO of Private Equity Fund Guilty of $140 Million Bank Fraud 2

Damian Williams, the United States Attorney for the Southern District of New York, announced that ELLIOT SMERLING pleaded guilty today to a bank fraud scheme that caused the issuance of approximately $140 million in collateralized loans on the basis of forged documents, including subscription agreements from purported limited partners, audit letters attesting to his private equity firm’s finances, and falsified bank account statements.  SMERLING also pleaded guilty to securities fraud in connection with his solicitation of investments in his private equity funds through materially false and misleading statements.  SMERLING pleaded guilty before U.S. District Judge Denise L. Cote, to whom his case is assigned.

U.S. Attorney Damian Williams said: “As he admitted today, Elliot Smerling used false documents and deceit to obtain over $100 million in fraudulent loans on behalf of his private equity funds. This Office is committed to protecting the integrity of the U.S. financial system, and going after fraudsters who seek to manipulate it for their personal gain. Thanks to our valued partners at the FBI, Smerling now awaits sentencing for his crimes.”

According to the allegations contained in the Superseding Information, court filings, and statements made during the plea proceeding:

From at least in or about January 2019 through at least in or about March 2021, ELLIOT SMERLING, the defendant, solicited and obtained loans totaling approximately $140 million on behalf of his private equity funds, which were secured by purported capital commitments made by limited partners in the funds.  SMERLING obtained the loans on the basis of falsified documents and material misrepresentations, including:  (1) a forged audit letter, purportedly prepared by an international network of accounting, audit, tax, and professional services firms, attesting to audited financial statements; (2) forged subscription agreements that falsely represented, among other things, that the investment fund of a private university based in New York, New York, and the chief investment officer of that fund had committed $45 million, and that the investment management division of a banking and financial services firm headquartered in New York, New York, and the chief executive officer of that firm had committed $40 million; and (3) falsified bank records purporting to attest to wire transfers from purported limited partners to Smerling’s funds. 

In connection with his bank fraud scheme, from at least in or about January 2013 through at least in or about March 2021, SMERLING also solicited investments in his private equity funds through materially false and misleading statements concerning the funds’ audited financial statements, limited partners, capital commitments, and holdings.

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SMERLING, 52, of Lake Worth, Florida, pleaded guilty to one count of bank fraud, which carries a maximum penalty of thirty years in prison, and one count of securities fraud, which carries a maximum penalty of twenty years in prison.  The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as SMERLING’s sentence will be determined by the judge.  SMERLING’s sentencing is scheduled for May 13, 2022 at 12:00 p.m. before Judge Cote.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation.

This case is being handled by the Office’s Complex Frauds and Cybercrime Unit.  Assistant U.S. Attorney Jilan J. Kamal and Timothy V. Capozzi are in charge of the prosecution.

22-037                                                   

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