Detroit Sues Real Token Over 400 Hazardous Properties

Detroit has initiated legal action against Real Token and 165 affiliated LLCs, marking what the city claims to be its largest nuisance abatement lawsuit to date. The lawsuit, filed in Wayne County Circuit Court, targets the Florida-based company's co-founders, Remy and Jean-Marc Jacobson, along with numerous corporate defendants. The city alleges that Real Token, a blockchain-based real estate investment platform, has failed to meet essential health and safety standards across over 400 properties under its management, leaving tenants in hazardous living conditions.

Conrad Mallett, corporation counsel for the City of Detroit, emphasized the city's stance on the matter, stating, "These defendants have profited from our communities while ignoring their most basic legal obligations as landlords and property owners." He further added, "Our neighborhoods are not investment portfolios, they are homes for Detroit residents." The lawsuit alleges that while Real Token promises high yields to investors, tenants are forced to endure unsafe and non-compliant living conditions, including properties lacking compliance certificates and basic amenities such as heat, water, and secure entryways.

The complaint details numerous instances of tenant hardship, including one tenant living without a working shower for over two years and another facing a collapsed porch that blocked access to her home. Inspectors identified 53 properties as posing an immediate risk to health and safety due to structural damage, mold, sewage backups, and rodent infestations. The city is seeking court orders to mandate repairs, establish rent escrow accounts, and hold the founders personally liable for their alleged refusal to authorize even basic repairs.

The lawsuit also claims that Detroit neighborhoods have been negatively impacted by the presence of dangerous structures and vacant, dilapidated properties managed by Real Token, which have allegedly invited squatters and criminal activity. The city's legal action aims to address these issues and ensure that tenants are provided with safe and habitable living conditions.

Real Token's business model involves fractional ownership, where real-world assets are tokenized and split, allowing multiple investors to own a single asset through the purchase of shares collectively. The platform claims to have launched the "world's first real estate tokenization platform" on Ethereum in 2019, later moving to Gnosis Chain due to rising fees on Ethereum. The platform's whitepaper suggests that asset tokenization could benefit from improved transparency, efficiencies, and lower minimum investments, particularly for asset classes typically considered illiquid.

In summary, Detroit's lawsuit against Real Token highlights the city's commitment to ensuring the safety and well-being of its residents by holding property owners accountable for maintaining their properties to meet health and safety standards. The legal action underscores the potential risks and challenges associated with blockchain-based real estate investment platforms and the importance of regulatory oversight in this emerging sector.