DOJ Launches Criminal Probe Into Simad Holdings and Shabsels Brothers as Scandal Deepens
The U.S. Department of Justice has opened a criminal grand jury investigation into Simad Holdings and its controlling shareholders, brothers Michael and David Shabsels, according to a filing submitted to the Tel Aviv Stock Exchange, marking a dramatic escalation in the company’s unraveling, The Real Deal reports.
The investigation is being led by the U.S. Attorney’s Office for the Eastern District of New York. As part of the criminal probe, federal prosecutors have requested that Simad produce company records and other documents.
In addition to the criminal investigation, Simad disclosed that it is also aware of a separate civil investigation by the U.S. Attorney’s Office for the Southern District of New York involving alleged fraud connected to the Paycheck Protection Program (PPP). The company said it is cooperating with both investigations.
The latest developments significantly intensify the legal and financial crisis surrounding Simad, which operated 30 well-known summer camps across the United States, and the mounting legal troubles facing its founders, David and Michael Shabsels.
The company raised approximately $200 million from Israeli bondholders in December but failed to make its first scheduled bond payment in May. Simad later disclosed that roughly $34 million belonging to bondholders had been transferred to companies controlled by the Shabsels brothers. Although the company demanded repayment of the $34 million, along with accrued interest, and the brothers initially agreed, Michael Shabsels later informed the company that he was unable to return the funds.
Both Simad and the Shabsels brothers filed for bankruptcy protection in June. Since then, the company has been placed under the management of a restructuring officer and has previously disclosed that it is also the subject of a criminal investigation by the Israel Securities Authority. As part of its restructuring efforts, Simad is selling off several of its camp properties, including Mohawk Day Camp, Camp Chen-A-Wanda, and Camp Achim.
According to the filing, the Justice Department’s criminal investigation encompasses Simad, the two brothers, and a network of companies under their control.
Over the years, David and Michael Shabsels established dozens of corporate entities tied to both their summer camp operations and broader real estate investments.
The brothers amassed a real estate portfolio of more than 80 properties, including shopping centers, apartment buildings, office properties, and SplashDown Beach Water Park in New York’s Hudson Valley. Their financing strategy relied heavily on creating separate ground leases, allowing them to own both the land beneath a property and the property itself while obtaining loans against each interest separately. The approach was designed to maximize borrowing capacity and secure financing approaching the full value of the assets.
{Matzav.com}