City claims blockchain firm failed to maintain properties while collecting rent
The City of Detroit has filed a lawsuit against a Florida-based blockchain real estate firm that the city says is responsible for some of the most neglected rental homes in its neighborhoods.
The lawsuit, described by city officials as the largest of its kind in Detroit’s history, targets RealToken (also known as RealT), a company offering fractional, tokenized ownership of properties to international investors.
The city alleges that properties linked to the company have accumulated hundreds of code violations, including deteriorating roofs, crumbling porches, broken windows, overgrown weeds, and other signs of serious disrepair. Many of the homes are considered unlivable, and tenants have reported mold, broken plumbing, and collapsed ceilings, according to the complaint.
The lawsuit follows an Outlier Media investigation published earlier this year that brought attention to the company’s practices.
RealToken operates by selling shares of rental properties through digital tokens. These properties, mostly in Detroit, are held by a network of limited liability companies tied to RealToken. Investors purchase tokens that represent ownership in the property, and in return, they receive rental income and voting rights over property-related decisions. Each property is assigned a management company responsible for day-to-day maintenance and tenant support.
On its website, RealToken claims it enables investors “around the globe” to access the US housing market through “fully-compliant, fractional, tokenized ownership.” Since its launch in 2019, the company says it has registered more than 65,000 investors.
But according to Detroit officials, the promised innovation has resulted in longstanding neglect, unpaid taxes, and non-responsive ownership.
"The company made a number of promises as well in a Zoom call and a lot of subsequent calls as well," city council president James Tate said in a statement. "Not one promise has been kept. They call. Not one thing has been moved. They’re not responsive. And they have not been paying their property taxes either. So, it’s personal. It’s personal."
"Behind the high-tech language lies a deeply familiar problem in this city, and that is neglected properties ... unresponsive management, and Detroit families, many of them single mothers, left to live in unsafe and unhealthy conditions," added council member Angela Whitfield-Calloway. “Tenants have reported persistent mold, broken plumbing, caved-in ceilings and a total lack of basic maintenance, yet their rent is still being collected."
RealToken shifts blame to third-party managers
In a July 3 statement, RealToken acknowledged the widespread issues but blamed the property managers it had hired.
The company stated that it had “been one of many victims in Detroit of several unscrupulous property management companies,” alleging that these firms were “paid hundreds of thousands of dollars” to manage properties, respond to tenants, and maintain housing in compliance with city codes.
Instead, RealToken claims these firms misused the funds and failed to meet obligations, which harmed both the company and its renters.
According to the company, it has since taken back control of its Detroit properties and is actively working to address violations.
“We have made complete repairs to over several dozens of properties, addressed hundreds of blight tickets, and have contractor teams in the field every day addressing each disgruntled tenant and city citation in turn,” the statement said. “This process cannot happen overnight. It takes time. But we are committed to addressing every issue, and finally execute on our original mission.”
RealToken said it had not yet been officially served with the lawsuit and declined to provide further comment.
Mortgage sector eyes blockchain despite growing pains
While Detroit’s legal action highlights the risks of combining decentralized technology with traditional real estate ownership, some mortgage professionals continue to see long-term potential in blockchain.
“Cryptographically wrapped data is going to be critically important, and will continue to be critically important, it will 100% come into play,” Stacia Weishaar of Delightful Refuge said in an interview with Mortgage Professional America. “With some deregulation happening potentially, I think this cryptographic behavior and ability for AI to come into play will continue to enhance our ability to protect consumers data.”
Read more: Is the mortgage industry ready for mass blockchain adoption?
Blockchain’s integration into mortgage underwriting is also advancing at the federal level. Last month, the Federal Housing Finance Agency (FHFA) ordered Fannie Mae and Freddie Mac to begin preparations to count cryptocurrency as an asset in mortgage applications.
FHFA Director Bill Pulte announced the decision on X, stating it followed “significant studying” and aligned with “President Trump’s vision to make the United States the crypto capital of the world.”
The order takes effect immediately and directs government-sponsored enterprises to implement the change “as soon as reasonably practical.”
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