Unfortunately JSmooth (as of version 0.9.9-7) lacks the ability to pass arbitrary JVM parameters to the JVM, but this is required by Squish to hook the JVM of the Java application. (Passing JVM properties is supported, but Squish also needs to pass the JVM parameters "-Xbootclasspath" and "-javaagent".)
The solution is to turn the setting Skeleton | Skeleton Properties | Launch java app in the exe process off:
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