South Florida fund manager forged documents to land $95 million loan, feds say
Florida private equity manager Elliot Smerling has overseen a growing empire of private equity funds reportedly worth more than $1.8 billion and lived a lavish lifestyle, with homes in Florida, New York and Brazil as well as a collection of luxury cars, including a Ferrari, a Corvette and a Cadillac Escalade.
But Smerling resorted to fraud to keep his complex financial operation afloat, according to a criminal complaint filed last week, falsely claiming in a
$95 million loan application that a private New York university had invested in one of his funds and forging a university official’s signature as part of the application.
He obtained the loan from Silicon Valley Bank in February but was arrested last week and charged with wire fraud and aggravated identity theft. He is accused of falsely claiming in the December 2020 loan application that the university, which is unnamed in the complaint, had agreed to invest $45 million in one of his funds and an unnamed New York investment bank had committed to investing another $40 million in the same fund. He is also accused of submitting a forged audit letter attesting to the financial health of the fund and later sending a falsified bank statement from December 2019 showing a $4.5 million wire transfer from the university and a $4 million wire transfer from the investment bank as part of their purported investments.
Smerling was denied bail Wednesday and faces up to 30 years in prison and a fine up to $190 million if he is found guilty.
In arguing for Smerling to be denied bail at the Wednesday hearing, Assistant U.S. Attorney Adam McMichael described Smerling’s “extreme wealth” with multiple properties in Lake Worth and Wellington as well as homes in New York and Brazil, where Smerling’s wife is from and where she still holds dual citizenship. He added that the government doesn’t have the full picture of Smerling’s wealth because he declined to provide details about his finances.
The combination of Smerling’s wealth, potentially long sentence and connections to Brazil, which doesn’t extradite citizens, make him a risk for flight, McMichael argued.
“With that extreme wealth comes opportunities that most individuals don’t have,” he said.
Smerling’s lawyer, David Kibuliun, argued that Smerling is a pillar of the community, citing his service on the board of the entrepreneurship program at the University of Miami’s business school. He said Smerling is a devoted father and wouldn’t pose a flight risk.
The arguments didn’t sway U.S. Magistrate Judge William Matthewman.
“The alleged fraud here involves $95 million which is an awful lot of money and there’s a very heavy prison sentence that would be imposed on the victim if he is convicted,” Matthewman said in denying Smerling’s request for bail. He said he would be willing to reconsider if more information was introduced to the court to better explain
Smerling’s finances and what happened with the money approved by the loan.
Smerling who was being held in Florida after his arrest last week will be transferred to the Southern District of New York, which is presiding over the case.
Kibuliun and the University of Miami declined to comment.
The parent company for Silicon Valley Bank indicated in its annual report to the Securities Exchange Commission Monday that it was participating with law enforcement in investigating the bank’s potentially fraudulent loan to one of Smerling’s funds,
JES Global Capital III. The company said it potentially stood to lose $70 million from the deal.