A colleague provided the answer so I'm passing it along.
With any Ontap system, each disk (represented by files in the simulator) are owned by one storage controller. This is needed for storage clusters to distinguish which cluster partner own which disks.
When you boot up the simulator for the first time it finds the simulated disks but the simulator instance does not own them. They are unassigned.
Simply reboot the simulator VM, press Ctrl-C to get in the advanced boot menu. There you have the option to initialize the system, clear all disks and assign them to the controller (it is option 4 or 5, if I remember correctly.)
All data will be erased because the files are all zeroed.