The city of Detroit has filed what officials call its largest nuisance abatement lawsuit ever. The target: a Florida-based company that uses cryptocurrency and blockchain technology to sell shares of Detroit rental properties to investors.
City officials say RealToken LLC and various subsidiaries have acquired hundreds of Detroit properties that way since 2019. But they say none of them has a required certificate of compliance, and most are in an appalling state of disrepair.
Detroit City Council member James Tate said he was “curious” when he first heard about Real Token properties — but by the time he saw some and spoke to tenants, that had changed to “furious.”
“Sewage leaking in the basements. We have standing water as well in many of the locations,” Tate said. “408 properties, and not one of them has a certificate of compliance. Not one.”
RealToken operates by purchasing rental properties. Those are then divided up into “tokens,” or shares of the property, and sold, city officials said, to an unknown number of investors using cryptocurrency, creating issues with transparency and figuring out how many properties Real Token and its subsidiaries have actually acquired.
“What is worse is that many of the tenants don't even know their homes are owned by this company, and they don't believe they have a clear path to getting the repairs done or having their concerns addressed,” said city council member Angela Whitfield Calloway. “The landlords are pretty much faceless. The investors sometimes are overseas. And the damage is very real."
“I call for action because I refuse to let Detroit be used as a test lab for speculative tech ventures that commodify our housing and ignore our residents,” Whitfield Calloway continued. “This lawsuit is a first and necessary step toward that accountability.”
Detroit corporation counsel Conrad Mallett said the city hopes the lawsuit will accomplish multiple objectives. The first, he said, is getting Real Token to pay the at least $500,000 it owes in blight violations, and forcing the company to make needed repairs and get certificates of compliance as mandated by city ordinance.
Mallett said the city is also asking the judge to hold RealToken co-owners Remy Jacobson and Jean Marc Jacobson "personally liable for the circumstances that their tenants find themselves [in]." “We are also asking the judge to take control of the entire process, so that even the vacant properties are properly attended to [and] properly registered, and that the tenants who live therein are able, while all these repairs are going on, to put their rent in escrow."
In a statement, a RealToken spokesman said that unscrupulous property management companies are to blame for the company’s issues with its Detroit rental properties.
“These companies were paid hundreds of thousands of dollars to oversee RealToken’s properties, address tenant complaints and make repairs, and maintain each of our properties in accordance with City of Detroit municipal codes,” the statement said. “As it turns out, there are many instances where these goals were not achieved, and each management company, in its own way, stole these funds to the detriment of RealToken and more importantly, the tenants we serve.”
RealToken is working on bringing those properties up to code through its own property management service and has been since last December, the statement continued. As for the city’s lawsuit, the company said it has not yet been served and declined to comment for now.
