Detroit Sues RealToken for Neglecting 400+ Tokenized Properties – Web3 Real Estate Model Shock
The City of Detroit has filed a lawsuit against RealToken LLC, a pioneer in real estate tokenization, for allegedly leaving more than 400 properties in a state of serious disrepair, threatening public safety.
The “Real Estate Tokenization” Scandal
RealToken LLC emerged in 2019 with a model that allows real estate shares to be purchased with cryptocurrency through the Ethereum and Gnosis Chain blockchains. The company claims its goal is to expand access to global real estate investment, through fractional ownership and decentralized management.
However, according to a lawsuit filed in Wayne County District Court, Detroit alleges that RealToken, its founders Remy and Jean-Marc Jacobson, and 165 affiliated companies have seriously violated their legal obligations as owners by allowing hundreds of properties to deteriorate to the point of being unsafe.
A series of violations that endanger tenants
According to an investigation by the Department of Building, Safety and Environmental Engineering, inspectors found hundreds of properties with:
Severe structural damage
Extensive mold, rodent infestation
Backflow of sewage systems
Illegal electrical/water connections
Of these, 53 were identified as immediate threats to the health and lives of tenants. The city alleges that RealToken used a network of “shell” companies to conceal ownership and avoid liability.
“Improvement Does Not Mean Absolution”
Detroit Asks Court to:
Force RealToken to Make Emergency Repairs
Set Up Escrow Accounts for Rent
Hold Jacobson Brothers Personally Financially Responsible
Conrad Mallett, City Corporation Counsel, said:
“This is the largest nuisance abatement case in Detroit’s history. New technology is not a legal shield to avoid moral and legal obligations.”
The Dark Side of Fractional Ownership in Blockchain
Despite its promises of decentralization and transparency, RealToken’s model has been criticized for:
Fostering speculation over housing development
Creating vacant housing
Deteriorating the appearance of surrounding communities
With many investors being foreign, fragmented ownership leads to a lack of incentive to maintain the properties, turning once-promising properties into burdens for local residents.
The Crypto Real Estate Market: Potential and Risks
Despite the strong warning, the crypto real estate market is still on the rise. Deloitte predicts that the sector could reach $4 trillion by 2035. The use of blockchain to own and trade real estate is attracting global capital due to its high liquidity and lower capital requirements.
However, as the RealToken case shows, innovation must come with responsibility. Technology cannot replace fundamental values: safety, transparency, and respect for the community.
