Israel Securities Authority Launches Criminal Probe into Simed Holdings

Israel's Securities Authority has officially launched a criminal investigation into Simed Holdings, following suspicions of reporting violations and other offenses. The company, which raised approximately 620 million shekels (about $165 million) from the public through a bond issuance in Tel Aviv in late 2025, is suspected of improperly withdrawing tens of millions of dollars without disclosing it to investors. The investigation began in late May after the authority requested clarifications regarding Simed's financial reports. Investigators suspect that during the relevant period, funds were withdrawn from Simed in violation of the law, without proper disclosure in the company's prospectus or reports. The authority is also examining suspicions that the raised funds were used for purposes inconsistent with those presented to investors, potentially jeopardizing Simed's ability to meet its obligations to bondholders. Furthermore, suspicions are being investigated that company assets were pledged improperly and without disclosure to investors.

These concerns mirror issues that surfaced in late May, specifically the outflow of funds and the pledging of assets that investors relied on as security. The authority stated that since the investigation's inception, its investigators have taken actions including obtaining court orders, demanding documents, and questioning company officials in Israel and abroad. The investigation is being conducted in close cooperation with U.S. law enforcement agencies.

Simed's financial troubles intensified shortly after its bond issuance, leading to bankruptcy proceedings in the U.S. under Chapter 11. The company's bonds, initially issued with a 7% annual interest rate, have plummeted to around 29 agorot, a roughly 70% drop from their value at the start of the year. Efforts have shifted from restoring normal operations to preserving and liquidating assets to maximize returns for creditors. Several summer camps have been sold as part of these proceedings, with three camps fetching approximately $47 million in July, adding to previous sales. The total expected proceeds from five asset sales reached about $122 million.

While the criminal investigation may not immediately alter the recovery rate for bondholders, which depends on remaining assets, liquidation proceeds, and the U.S. bankruptcy proceedings, it is crucial for understanding how a company that raised significant public funds in Israel could face such a severe financial crisis within months. The investigation aims to clarify who knew what, when they knew it, and the effectiveness of the company's control mechanisms, despite the presence of prospectuses, underwriters, trustees, directors, and auditors.