Two Literal Crypto Bros Built a Real Estate Empire. Then the Homes Started to Fall Apart | WIRED

CommentLoader-

Save StorySave this story

CommentLoader-

Save StorySave this story

The smell hit me first: damp brick, stagnant water, mold, and bleach. I was partway down a flight of wooden stairs that led to the basement of a 1920s duplex in east Detroit, Michigan. Leading the way was Cornell Dorris, a tenant in the building for nearly a decade. Dorris is in his early forties, has two daughters who visit on weekends, and makes a living smoking meat and cooking for events.

As my eyes adjusted, I made out rodent droppings and a black puddle that spread across the basement floor. “Anytime it rains, the water comes down,” Dorris said. The air was unnaturally heavy, and I felt a nagging urge to leave.

Dorris doesn’t have a typical landlord. Almost four years ago, his building was acquired by a startup called RealToken, or RealT. The company had a plan to “democratize access to real estate investment” using cryptocurrency technology. The idea was that a property could be represented by thousands of crypto tokens sold for around $50 each. Token owners would collect a portion of a property’s rent, possibly making an annual return as high as 12 percent. They also could profit from any growth in the property’s value.

Investors lapped up the idea, and RealT went big on Detroit, snapping up approximately 500 buildings. It also bought around 200 properties in more than 40 other cities across the Americas, bumping the combined value of its portfolio to roughly $150 million. US residents are not allowed to invest, for regulatory reasons, but at least 16,000 people from 150 countries have purchased RealT tokens. Though reliable figures are difficult to come by, RealT once called itself the “largest real estate tokenization platform in the world, by all metrics.”

The flooded basement at the duplex where Cornell Dorris lives.

Photograph: Joel Khalili

For all its triumphs in the cryptosphere, though, RealT has run into plenty of real-world trouble. Last summer, the City of Detroit sued RealT and its founders, alleging “hundreds of blight violations.” Dorris’ property was one of many that city inspectors declared unfit for habitation. He told me that while his previous landlord wasn’t perfect, sometimes leaving Dorris to organize repairs, his building has deteriorated markedly since RealT entered the picture. The smoke detectors are missing, and the bathtub has no hot water, inspectors found. “The only way of washing is me standing over my sink,” says Dorris. “There are rats in the downstairs, there are squirrels in the upstairs.”

As a proportion of the US housing market, estimated by Zillow to be worth $55 trillion, tokenized real estate is a rounding error. But the concept of using crypto to buy fractions of an asset—whether art, gold, oil, or stocks—has grown in just a few years into a $30 billion industry, per Deutsche Bank. Yet in Detroit, the promise of spending a few bucks to become a landlord, often from the other side of the globe, has collided with the inconvenient physicality of homes and the humans who live in them.

At 8821 Prairie, windows are missing at the front and side of the house, the porch stairs have crumbled, and the panelling is bent out of shape.

Photograph: Sarah Rice

A tree grows up the right flank of the house, where more windows are missing.

Photograph: Sarah Rice

The stairs leading to the front door are splintered and broken.

Photograph: Sarah Rice

A pair of Canadian brothers, Rémy and Jean-Marc Jacobson, founded RealT. They aren’t twins but look like they could be—both have glasses, slicked-back hair, salt-and-pepper mustaches. Both identify as staunchly libertarian, favoring free markets and minimizing the reach of government. When we met over Zoom, Jean-Marc was impassioned and occasionally prickly. I got a little wordy trying to frame a question in a tactful way, and he told me, “Just ask it.”

The Jacobsons grew up in Canada and Europe, part of a colorful family that has been embroiled in court proceedings that span the globe. A sister’s bitter divorce culminated in a fight over a multimillion-dollar fortune that had been sequestered in the Bahamas, which she won. Their brother-in-law received a suspended prison sentence after he was linked to a group that had been involved in the illegal sale of arms to Angola. When their father, a financier, was asked about the family's fortune in a 2003 article, the reporter was told, “Don't ask and I won't not tell you.”

Rémy and Jean-Marc have said that they carved out their real estate careers by turning over properties in Quebec and parts of the US. Then, in the early 2010s, they discovered bitcoin. Almost immediately, they launched their own bitcoin mining operation, followed by various other companies and a nonprofit. The brothers got entangled in bitcoin-related troubles too—they fell for a Ponzi scheme, and settled with a client that accused their firm of withholding a crypto payment now worth millions.

As early a