Anthony Smith, 72, pleaded guilty to three counts of fraudulent trading activity in March.
He was sentenced today, according to a statement on the Crown Prosecution Service (CPS) in the UK.
Smith took grants to the tune of £4.7m ($6.11m) from the EU and Welsh Government to develop a fishmeal alternative, but the Cardiff Crown Court heard he used the money for other purposes.
The grant funding was linked to Smith’s companies including Dragon Research Ltd, Dragon Feeds Ltd and Dragon Baits Ltd, relating to the development of ragworms for use in aquaculture, according to a statement on the UK’s Crown Prosecution Service (CPS).
Ragworms are a farmed polychaete that provide a potential source for fatty acids and protein and can be fed to fish or shrimp.
Permission to develop the ragworm facility was granted in 2006. When completed, the site was to have had more than 270 ragworm breeding ponds. However, the Dragon Feeds facility went into liquidation in 2011.
The CPS said Smith falsely promised the enterprise would bring 120 new jobs and investment to Port Talbot and Pendine in Carmarthenshire but in reality, only 11 people were employed as a result of the fraud.
Janet Potter, deputy head of the specialist fraud division at CPS, said:
"Anthony Smith defrauded the taxpayer of millions of pounds by wildly overstating how much money had been spent, and lied about the purchase of equipment.
“He did this all under the guise of being environmentally-friendly and boosting the local economy.
“He promised to make Wales a world leader in the aquaculture industry, but instead he abused the system and robbed the local community of investment.”
Two of Smith's former employees were also sentenced after pleading guilty to separate charges.
Colin Mair, 68, who helped Smith run his Dragon Research firm, was given a 21-month prison sentence suspended for 18 months for one count of fraudulent trading. Keith Peters, 72, who worked as an accountant for Smith, was given 15 months in prison after admitting two counts of false accounting.
An important part of establishing the case against Smith was to prove that he “knowingly and willfully” misused the allocated governmental grant funding, said CPS.
That process required the use of specialist software to analyze Welsh Government financial records, CPS said. An additional seven million ‘items of digital material’ were checked to make sure there was nothing to “undermine” building the case.
“A forensic accountant was hired to review financial accounts which enabled the CPS to prove that Smith had deliberately structured the business in order to hide the flow of illegitimate funds,” CPS said.