Prosecutors Dig into Simad Holding Fraud

The Department of Justice launched a grand jury investigation into Simad Holdings and its controlling shareholders, Michael and David Shabsels, according to a filing on the Tel Aviv Stock Exchange.

The U.S. Attorney’s Office for the Eastern District of New York is conducting the investigation. As part of the probe, Simad received a request to hand over documents. 

The company also mentioned it is aware of a separate civil investigation brought by the U.S. Attorney’s Office for the Southern District of New York into Paycheck Protection Program (PPP) fraud. Simad said it is cooperating with the investigations.

This marks a sharp escalation in the collapse of Simad, an operator of 30 popular U.S. summer camps, and the legal issues facing its founders, brothers David and Michael Shabsels.

Simad raised about $200 million from Israeli bondholders in December, but missed its first payment in May. The company further revealed that about $34 million of bondholders’ money had been diverted to companies controlled by the Shabselses. The company asked the Shabselses to return the $34 million plus interest, but after agreeing to do so, Michael Shabsels said he could not return the money. 

The company and the brothers personally filed for bankruptcy in June. Simad, now run by a restructuring officer, previously revealed it faced a criminal investigation from the Israel Securities Authority. The company is now in the process of selling off its camps, including Mohawk Day Camp, Camp Chen-A-Wanda and Camp Achim. 

Michael and David Shabsels did not return a request to comment.

The DOJ’s criminal investigation focuses on Simad, the Shabselses and the Shabselses’ companies. 

The Shabselses set up dozens of entities associated with their camp and non-camp real estate holdings. 

The Shabselses owned over 80 real estate assets, including retail centers, apartments, offices and the SplashDown Beach Water Park in the Hudson Valley. Their real estate strategy centered around creating ground leases, in which the brothers owned the land underneath the property, along with the property itself, and then taking out loans on both parts. The goal was to obtain nearly 100 percent financing. 

The Shabselses’ love of leverage extended beyond traditional banks. In addition to property-level mortgages from regional banks and Commercial Mortgage Backed Securities loans, the brothers amassed more than $230 million in financing from merchant cash advance lenders. In the event of a default, the lenders could withdraw money from the Shabselses’ companies’ checking accounts. The bankruptcies stopped the withdrawals.

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