The Road to Smarter RWA Tokenization

Tokenizing real estate doesn’t work when you forget that someone still has to fix the roof

Today’s post is guest-written by Chris Paul. Chris the the Founder/CEO of Clara, an end-to-end white label tokenization platform. I am an advisor to Clara, so I may be a little biased here, but I can’t say enough about Chris. The Clara team bootstrapped this platform build themselves, out of Detroit, and now Chris is deep in the early stage grind. He is a natural dealmaker, he knows how to get shit done, and he always has a great attitude.

Bet on Chris. I did.

The post today is a case study in how tokenized real estate can go wrong when the tech skills aren’t matched with real world hands-on real estate management experience. It is a great read, and it’s instructional for how to build going forward.

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Introduction

RealToken (often stylized as RealT) burst onto the scene as a blockchain-based real estate investment platform, promising to democratize property ownership through tokenization. By allowing investors worldwide to buy fractional shares of Detroit rental homes via cryptocurrency tokens, RealT touted itself as an innovative solution for real estate finance. However, recent events have revealed a stark gap between the platform’s high-tech promises and the on-the-ground reality in Detroit. In July 2025, the City of Detroit filed a major lawsuit against RealT and its web of affiliated LLCs, alleging that the company neglected basic landlord duties — leading to hundreds of poorly managed, code-deficient properties that endangered tenants and blighted neighborhoods. This development underscores fundamental challenges in scaling real estate tokenization and offers lessons on how tokenization should (and shouldn’t) parallel traditional securitization. In this article, we examine:

• The rumblings about RealT’s mismanaged properties that culminated in the lawsuit

• Why RealT’s aggressive growth outpaced its ability to responsibly manage homes (focusing on its tokenization process, Series LLC structure, and management approach)

• The broader parallels between tokenization and securitization, including key differences in how they trade, why traditional securitization pooled assets instead of fractionalizing single ones, and how new models of tokenizing pooled assets (e.g. private equity funds holding real estate) can solve the scaling issues exposed by RealT’s case

RealT’s Neglected Properties and Detroit’s Lawsuit

What began as an ambitious fintech venture in Detroit’s property market has now devolved into a legal and PR crisis for RealT. Detroit’s lawsuit, described by officials as the largest nuisance abatement case in city history , accuses RealT and 165 related shell LLCs of systematically failing to maintain over 400 rental homes. The allegations include dozens of RealT-owned houses allegedly have leaky roofs, collapsing ceilings, missing doors or windows, rodent infestations, nonfunctional heat or plumbing, and other serious building code violations. Many properties became unlivable eyesores, attracting crime and blight that not only endanger tenants but also drag down entire blocks. City inspectors issued over $500,000 in tickets to RealT properties for such violations, and none of the 408 homes cited had the required certificates of compliance for rental properties. Neighbors and tenants had been “fed up with faceless landlords,” complaining of unaddressed hazards . One renter reportedly went two years without a working shower due to lack of repairs.

Detroit officials lambaste RealT for profiting off the community while shirking fundamental duties as a landlord. The city’s complaint asserts that RealT tried to “hide behind 165 different corporate entities” (i.e. a network of LLCs owning each property) to evade accountability.

Notably, the warning signs about RealT‘s property management troubles were present well before the lawsuit. Local journalists and community groups had been sounding the alarm for months. An investigation by Outlier Media in early 2025 found that RealT’s Detroit portfolio had amassed over 1,000 blight violation tickets and at least $2 million in unpaid fines and property taxes, even as the company continued acquiring houses. By mid-2025, the unpaid tax bill had swelled to over $3.1 million and more than 100 RealT houses sat vacant. Tenants told of chronic disrepairs, such as mold, buckling floors, broken fixtures , and inability to even reach a landlord for help, apart from receiving automated rent demands. Neighbors observed yards with grass and weeds left overgrown and derelict homes becoming magnets for scrapping and squatting. These rumblings made it increasingly clear that RealT’s on-the-ground operations were faltering badly.

RealT allowed its reach to far exceed its grasp in Detroit. The result was a breakdown in basic property oversight and resulted in a cautionary tale that raises serious questions about the company’s business model and scaling strategy, which we explore next.

The Series LLC Tokenization Model and Scaling Challenges