ABC Capital, which has been selling distressed real estate in Baltimore to foreign and out-of-state investors, has been hit with three new federal lawsuits in Pennsylvania alleging they are running a Ponzi scheme.
A fourth lawsuit was filed Friday in Baltimore Circuit Court by an Oregon investor who helped ABC Capital fund purchases and says he was not paid back.
The Baltimore Banner reported this week on mounting lawsuits and complaints against ABC Capital, which since 2016 has sold investors on a “hands-off” income-producing process in which the company and affiliates will acquire Baltimore properties and rehab and manage them as rental properties. But many say promised repairs didn’t take place, properties sit empty and guaranteed rent payments weren’t made.
One of the new federal lawsuits was brought by investor Ricardo Oved, who is said to be based in Miami and invested more than $3.3 million to purchase 25 properties, 18 of which are in Baltimore. Oved said he discovered last year that ABC had failed to make any renovations to 20 properties and “absconded” with $1.24 million earmarked for such renovations.
In another suit, the buyer said they spent $94,700 for the purchase and renovation of 1200 N. Milton Ave., but the title was never even transferred and the renovation has not taken place, according to the lawsuit and property records.
The federal suits accuse ABC and affiliated companies of operating “as a corrupt organization under the Racketeer Influenced and Corrupt Organizations Act in a sophisticated Ponzi scheme.”
Attorney Matthew B. Weisberg of Morton, Pa., who is representing all three plaintiffs, said that while his firm focuses on complex financial litigation surrounding business and consumer fraud, “we are nonetheless struck by the breadth and depth of ABC’s scheme and resultant financial loss to its victims.”
The fourth suit filed Friday in Baltimore is from Oregon investor Jay Hinrichs, who from 2018 to the spring of 2020 says he gave ABC Capital $376,200 in loans to acquire property in Baltimore and Philadelphia and has only been paid back $10,500. Attorney Thomas C. Valkenet said Walsh either didn’t fund the main loan, or failed to pay the promised return.
Jay Walsh, who ran ABC Capital and now leads a company called IPP USA LLC, told the Banner that he would not comment on pending lawsuits but said lawyers were simply “copying and pasting” allegations.
“I do not leave vacant houses in the city for which I was paid to construct. Owners have responsibilities to pay for their investments,” Walsh said.
But he acknowledged properties that were not renovated and rented, attributing it to a “myriad of reasons.” He offered pictures showing the previous condition of homes that have since fallen into disrepair and said he no longer offers to rehab or manage properties.
All of the investors in the new lawsuits say they were recruited by a man named Ricardo Scattolini, who was working with ABC in Miami and has since relocated to Baltimore, operating a company called Portfolio Properties.
In the spring of 2019 Javier and Ariel Opoczynski connected with Scattolini and said they were told the homes would be fully renovated within 60 days of settlement and would earn annual returns of 10 percent per year for the first two years, the lawsuit says.
In May 2019, the Opoczynskis selected two properties for the investors: 2939 Erdman Avenue in Baltimore, and another property in Philadelphia. Using a limited liability corporation, “Tzipora LLC,” they paid a total of $234,025 for the purchase and renovation of the two properties, the lawsuit says.
The contract said the property was warrantied for the first two years and the buyers would have no maintenance costs, rents would be guaranteed at $1,250 per month for two years and the buyer would give back 10 percent for property management.
“Despite the contractual guarantee of rental payments for a period of twenty-four months from Defendant, ABC Capital - Baltimore LLC, Plaintiffs only received rental payments for fourteen months, for a total of $16,185,” the lawsuits says. “Further, despite paying for the full renovation of the Erdman Property, Defendants failed to make any renovations thereto; but instead absconded with the $56,000 paid for renovations.”
The lawsuit says they discovered in 2021 that the property was “in a state of disrepair” and paid $19,730 for repairs to make it marketable. They sold it in last month, the lawsuit says, for $135,200. They’re seeking “in excess of $300,000″ in damages.
The third lawsuit was brought by Nova Home Group LLC, whose ownership is not disclosed in the lawsuit or incorporation documents. It was created in Delaware in 2020.
The lawsuit says the company was also introduced to ABC through Scattolini in 2019 and bought a home in Philadelphia and three properties in Baltimore through Walsh’s IPP USA LLC: 1200 N. Milton Ave., 1732 Normal Ave., and 4703 Beaufort Ave. The contract called for the same terms regarding rental income and property management. In total, they paid $276,542 for the acquisition and renovation of the properties.
The Milton home was never transferred to them and they received only one month of rental payments, the suit says.
The lawsuits peel back additional layers showing who is getting paid when Baltimore homes were sold to investors through ABC Capital. The Normal Avenue property contract shows a number of companies who the plaintiffs say were not involved received commissions and payments: Miami broker PGutman LLC received a $4,262 “referral fee,” real estate agency Miami Life Realty LLC received a $5,115 “referral fee” and a company called USA ReBuilders LLC received a “renovation fee” of $3,410.
The owners didn’t receive any of the promised rental payments and no renovations were made, the lawsuit alleges. They didn’t obtain possession of the property until April of this year, when they changed the house keys through a new management company “after months of unresponsive attempts to communicate with Defendants.”
The Beaufort Avenue property was bought for $94,147 in August 2020, with the owners charged $41,000 for “rehab” that was paid through settlement. ABC, Asset 1 Holdings, PGutman, Miami Life Realty and USA Rebuilders received a combined 40.6 percent commission on the sale through fees, the suit says.
“Plaintiff only received sixteen payments for partial rent” for that property, the lawsuit says. “Although Plaintiff was contractually guaranteed to receive $23,760 in net rental payments, Plaintiff only received a total of approximately $8,974. Further, despite paying for the full renovation of the Beaufort Property, Defendants failed to make any renovations or repairs thereto.”
Their lawsuit seeks “in excess of $500,000.”
Oved bought his properties through LLCs named “Fund Delta 1 BAL LLC” that was established by ABC Capital. His suit seeks more than $1.5 million in damages.
An investigation by the Baltimore Banner found that ABC Capital has been the subject of more than 30 lawsuits filed in state and federal courts in Baltimore, Philadelphia and Miami. One case brought by a group of more than 30 investors located in Hong Kong is slated for trial in U.S. District Court in Philadelphia later this month.
The attorneys who filed this week’s lawsuits previously reached a settlement with ABC related to six other properties, four of them in Baltimore, that the Mexico-based investor said were not renovated.