One may be tempted to develop a case just because it's a unique or especially interesting situation. But if a case doesn't have a purpose embedded in some educational or research context, it may not be worth investing the time and resources to develop it. Every teacher should have a pretty good idea why they are developing a case and where it will be used before beginning it. Case studies come in all kinds of types. Most cases are intended to represent reality, although they may be disguised to protect the privacy of principals in the case.
Simulations are very worthwhile exercises for students.
A simulation is a good way to accomplish this. However it is not a true case if the facts come from the teacher's imagination rather than reality. There is considerable student motivation and educational advantages in using real cases. Truth is often stranger than fiction. Students just seem to like trying to solve other people's real problems.