ABC Capital, the Philadelphia company that dozens of overseas investors say ripped them off in their purchases of distressed properties in Baltimore, disclosed this week that it owes nearly $4 million in judgments.
The disclosures came in bankruptcy proceedings in U.S. District Court in Pennsylvania, more than a month after the company filed for Chapter 7 protection but cited no assets or liabilities.
An attorney for the company told a judge last week that he was compiling an accurate accounting of their obligations, and that ABC Capital is preparing to file a new, Chapter 11 bankruptcy as soon as this week. In addition to the judgments, the company faces a slew of pending complaints in Pennsylvania, Maryland and Florida.
“It’s a company that is just riddled with litigation at the moment,” attorney Paul S. Peters III told the court.
By its nature, the bankruptcy filing throws into jeopardy the claims brought by investors who say they wanted to own, fix up and rent properties in Baltimore but were defrauded by the company. That, in turn, raises the prospect that the homes will languish and fall into further disrepair in areas badly in need of investment.
A spokeswoman for the city housing department said the agency has not undertaken any specific review of properties owned by ABC Capital investors, many of whom are thousands of miles away, do not speak English, and say they don’t know what to to do with properties that ABC had promised to renovate.
There are at least 14,000 vacant homes in the city. ABC says it has been involved in more than 1,200 transactions here, but those represent only a fraction of the thousands of vacant homes controlled by out-of-state owners, LLCs and defunct companies or dead people.
The city housing department “has not done a formal analysis of trends related to house flipping and foreign investments and the City had no sales to that entity,” spokeswoman Tammy Hawley wrote in an email. “The private investors who may have been scammed by ABC have taken the matter up in court.”
The Pennsylvania Attorney General’s Office denied a public records request from the Baltimore Banner on Thursday related to past complaints about ABC Capital. “While there is more than one consumer complaint filed with the OAG concerning ABC Capital Investment entities, and corresponding investigative materials that have been identified, the complaints and investigative materials are not subject to release,” Deputy Attorney General Sharon K. Maitland wrote. Maitland said the office did not want to reveal information related to the “institution, progress or result of an OAG investigation.”
Adam M. Freiman — a Baltimore bankruptcy attorney who is not involved in the case — said that in the vast majority of Chapter 7 cases, the debtor “has literally nothing, or, everything that the debtor owns can be protected or exempted.” The chances of creditors getting paid anything back are “very, very, very small,” he said.
ABC’s owners would convert the proceedings to Chapter 11 if they have assets that they want to hold onto, and it would increase the chances of creditors receiving relief, Freiman said. Still, ABC listed those claims as “non-priority” and “unsecured,” and tax liens and tax obligations will receive priority.
Dean Weisgold, a Philadelphia attorney, represents Israeli investors who bought one property in Philadelphia and one in Baltimore through ABC Capital. He said his client recently learned ABC re-sold the Baltimore property years ago without telling them. And the Philadelphia property collapsed and caused damage to an adjoining home, Weisgold said.
He said most investors will likely find it’s “not worth it financially” to continue to press for relief from ABC Capital. “I don’t know if they have any assets left,” he said. “If they don’t have any assets, then the creditors will get nothing out of it. If they do have assets but are kind of moving them around to appear to be insolvent, then there may be some hope for the creditors to get some of that money.”
Weisgold noted that the bankruptcy judge had asked skeptical questions of Peters, ABC’s bankruptcy attorney, including whether he was capable of handling a Chapter 11. He said Peters asked a “really bad question” when inquiring if he had to list each creditor separately or could lump them together with common attorneys.
Weisgold said he hoped the judge and trustee appointed to the case will scrutinize ABC’s claims.
Meanwhile, a settlement was reportedly reached this week in a rare case in which ABC Capital was the plaintiff instead of the defendant. The case was brought by ABC Capital in 2021 against the Miami-based Property Invest MD LLC, which in 2019 started selling homes in Baltimore to mostly Turkish investors. ABC alleged that Property Invest stole their business model by luring away one of their employees, who provided confidential business information.
The two were set to square off in a Baltimore Circuit courtroom Monday, but a court official said the case had been settled. No formal settlement order has been entered in the case, and terms of such settlements are not typically disclosed.
Attorneys for ABC and Property Invest did not return messages seeking comment.
In a recent motion filed in the case, Property Invest said they formed a company with ABC Capital employee Ekrem Uysaler, one day after Uysaler had executed a “commission agreement” with ABC and its affiliated companies that included a noncompete agreement.
Property Invest wrote that it initially invested in more than 20 properties in Baltimore, including the purchase, sale and renovation of the properties.
“As Property Invest USA continued to operate, [owner Cengiz] Bayirli recognized that rehabilitation and other carrying costs exceeded expectations to the detriment of the company’s profitability,” the motion says. “Bayirli attributed part of the excess costs to the lower caliber of the property in which they were investing and raised the issue with” Uysaler.
Property Invest MD, meanwhile, has not faced such complaints. Investors contacted by The Baltimore Banner say they were receiving their promised guaranteed rent even as one-fifth of the properties sit vacant.
Public recording of property transactions is delayed by about four months; the most recently posted transactions date to August and September, with Property Invest spending an average of $57,000 to purchase 13 homes. The homes are then flipped the same day in a double closing, for an average of $117,000.
One of the most recently posted transactions involved buying a home from the estate of a man who had lived in it since 1977. The home was acquired for $10,000, and flipped in a same-day double closing for $111,000. It’s assessed at $23,000, and the home buying site Redfin estimates it’s worth $42,000.