US Justice Department Investigates Israeli Summer Camp Company Simad Amid Securities Probe

Simad Holdings, an Israeli company operating summer camps in the US, is now under investigation by the US Department of Justice alongside an ongoing probe by the Israeli Securities Authority. The US investigation, led by the federal prosecutor for the Eastern District of New York, involves a criminal inquiry conducted before a grand jury. Simad has been asked to provide relevant documents to investigators. Additionally, a civil investigation by the Southern District of New York's prosecutor is examining allegations of fraud related to COVID-19 relief funds involving the company's controlling shareholders and their other businesses.

Simad, founded by brothers David and Michael Shabsales, raised 620 million shekels through bond issuance on the Tel Aviv Stock Exchange in December. However, by late May, it emerged that the controlling shareholders withdrew approximately 100 million shekels from the company and its subsidiaries without repaying the funds as promised. This led to Simad defaulting on bond payments, suspension of bond trading, and the company entering bankruptcy proceedings.

Last month, with bondholders' consent, Asaf Ravid was appointed as Chief Restructuring Officer, gaining management authority. Simad has begun asset liquidation efforts to repay its debts. This case, along with a similar scandal involving BVI company Cohen Properties, where controlling shareholders misused bond proceeds, raises concerns about transparency and due diligence in Israeli capital markets. It may also impact future bond issuances by BVI companies on the Tel Aviv Stock Exchange after a recent surge in such fundraising activities.