The Department of Justice launched a grand jury investigation into the bankrupt summer camp operator, escalating legal pressure on 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.
An American summer camp empire filed for bankruptcy after the owners, David and Michael Shabsels, missed their payments to bondholders in Israel and transferred $34 million to themselves.
Simad Holdings, the owner of about 30 popular summer camps such as Camp Blue Star and Mohawk Day Camp, filed for Chapter 11 bankruptcy in New Jersey on June 4, listing 50,000 to 100,000 creditors and $500 million to $1 billion in liabilities. David and Michael Shabsels both filed for personal bankruptcy.
The Shabsels brothers own 22 overnight camps and eight day camps that serve around 20,000 children.
Their empire spans Kiwi Country Day Camp in New York, Camp North Star in Maine, Chen-a-Wanda Camp in Pennsylvania, and Willow Lake Day Camp in New Jersey.
The brothers tapped Israel’s bond market for roughly $214 million, joining a long list of U.S. developers who sought cheaper capital overseas. Then came another layer of financing through more than $100 million in merchant cash advance loans, one of the most expensive forms of borrowing available.
The debt strategy backfired.
The brothers had taken out at least $234 million from merchant cash advance firms, whose contracts gave them the right to withdraw money from Shabselses’ company accounts.
Just months after completing the Israeli bond raise, Simad disclosed it would default on its first payment.
In late May, Simad revealed it transferred $34 million to the brothers’ companies. Simad’s audit committee asked the brothers to return the money. The Shabselses agreed, but Michael Shabsels said days later they were unable to return it.
The firm is now under investigation by Israeli securities authorities.
Reports by Israeli business outlets Globes and Calcalist sparked alarm among investors, sending Simad’s bonds into junk-bond territory before trading was ultimately suspended by the Tel Aviv Stock Exchange.
Despite the chaos, camp leaders rushed to reassure families.
“These are simply some behind-the-scenes matters that are being sorted out, but nothing that affects our campers, staff, or program,” wrote Adam Wallach, director at Mohawk Day Camp.
In a June 6 message, Blue Star owners Lauren Popkin Herschthal and Seth Herschthal said “Blue Star’s operations and leadership remain strong, and camp is financially solvent.”
They added that camp operations “are supported by its own resources, and the matters described in the recent articles should not impact any aspect of the camp experience for our campers and staff.”
“I really don’t know anything,” a different representative for one of the camps told Anash.org. “I just know camp is moving forward as planned.”
The camps serve about 20,000 children, and the news led to concerns about summer plans.
A New Jersey bankruptcy judge approved access to operating accounts for Simad’s 30 camps, allowing them to pay staff, suppliers and other expenses during the summer season. The camps, most of which are in the northeastern United States, are expected to open as planned later this month.
Since declaring bankruptcy, the brothers and their firm have refused to speak to the press.
The Shabselses, who live in Westchester, Long Island and New York City, are prominent philanthropists.
David Shabsels is listed on Orthodox Union’s Benefactor Circle, and Michael Shabsels and his wife are listed as members of United Hatzalah’s U.S. National Board.
In the viral moment that sparked the crisis, the disclosure of the $34 million transfer hit like a bomb in early June.
Simad, led by the Shabsels brothers and based in the British Virgin Islands, raised $195 million on the Israeli bond market in December. The offering was secured by 13 of the camps: Camp Achim, Chen-A-Wanda, Club Getaway, Country Roads Day Camp, Eagles Landing, Echo, Green Lane, Malka, Lavi, Meadowbrook, SHMA Camps, Mohawk and Rolling Hills Day Camp, according to Israeli ratings agency Midroog.
Simad’s default came much more quickly than the others. It happened within just six months of the bond raise and after receiving an investment grade rating from the ratings agency.
The brothers began acquiring camps in 2006 and steadily built one of the largest camp networks in the country. Their business model typically involves creating separate entities for camp operations and real estate ownership, with some original camp owners remaining involved as partners.
The probe is being run out of the U.S. Attorney’s Office for the Eastern District of New York, which has already requested documents from the company.
Simad also disclosed awareness of a separate civil investigation by the U.S. Attorney’s Office for the Southern District of New York into potential Paycheck Protection Program fraud.
The transfer was reportedly completed without required board approval.
The dismantling of the Shabsels brothers’ summer camp empire took another step as two camps found buyers through the bankruptcy process. Warner Bros. Discovery CEO David Zaslav agreed to serve as the stalking horse bidder for Mohawk Day Camp in Westchester with a $68 million offer, while Camp Achim in the Catskills reached a $7 million sale agreement with its longtime operator.