BOOM TO BLIGHT

ABC Capital was one of Philly’s biggest real-estate companies. Critics call it a “big fat nasty scam.”

• By Samantha Melamed and Ryan W. Briggs
• Published Dec 15, 2022

When Georgia Knox saw the ad on Craigslist for a three-bedroom rowhouse on a quiet block in Nicetown back in 2014, it seemed like the answer she’d been hoping for. It was just big enough for her growing family. She had two children, and was pregnant with a third.

“I was in a desperate state,” she said. “I needed some more space.”

The agent said the rental was still under renovation; she couldn’t even look at some rooms. But Knox decided to go ahead and put down a deposit.

She now calls that the worst mistake of her life.

“Since I been here,” she said, “it’s been nothing but headaches and problems.”

Knox, who suffers from asthma and other lung conditions, said a leaky roof had nourished dark blooms of mold across the walls. The toxic situation, she said, forced her to wear a surgical mask and use nebulizer treatments to breathe in her home. Then there’s the heat, which only works in her bedroom, so on cold nights her whole family lives in that room, dragging in their mattresses to sleep on her floor.

Over the years, she tried calling the company she said she’d leased from: ABC Capital Investments. But she said those calls went nowhere.

Knox had little sense that ABC had quietly become one of Philadelphia’s largest buyers of single-family real estate — facilitating $82 million worth of purchases — or that there were many tenants like her, stuck in crumbling homes.

ABC, a partnership between a Delaware County serial entrepreneur with a rocky business history and two Israeli expatriates, was involved in the purchase of some 1,900 Philadelphia properties over the past decade through a network of more than 600 individual companies it set up largely for overseas investors. ABC promised those stakeholders a turnkey investment opportunity, selling them homes in the city’s poorest neighborhoods, and assuring them that lightning-fast renovations and efficient property management would transform dirt-cheap properties into revenue engines.

But today investors and housing advocates allege that ABC’s vast scale was possible only because it was a scam — one that bilked investors, endangered tenants like Knox with shoddy and sometimes illegal construction work, and left a legacy of blight that may extend to hundreds of properties across the city.

Jason “Jay” Walsh, the local founder and public face of ABC, counters that he made many of his clients rich, turned blighted properties into decent housing, and shelled out “millions of dollars in repair work.”

“Are there cases where a house is dilapidated one way or another? Absolutely,” he said. “But have we made investors millions and millions of dollars? Absolutely. But are there always going to be disgruntled people? Yes.”

Karla Cruel, who began tracking ABC in 2018 as a staff attorney at Tenant Union Representative Network, said she began noticing patterns after one tenant described urine running down the walls of their living room every time they flushed the toilet.

“That stuck in my head,” she said. “Other people came in and described situations like that. I said, ‘Oh, you’re talking about ABC Capital.’ And they said, ‘Yeah, how’d you know?’”

She started keeping a file on its properties. She labeled it simply, “Bad Landlords.”

“It’s almost always in poor communities, with high rates of people of color,” she said. “But they were screwing over the tenants and the investors at the same time. It was just a big old scam — a big fat nasty scam.”

Cruel said she reported that alleged scam to the FBI and urged the city Department of Licenses and Inspections to take concerted action on building-code violations, with no apparent effect. Another lawyer said he has been in contact with the Pennsylvania Attorney General’s Office. The office declined to comment on whether it’s investigating.

In 2016, ABC expanded its business model to Baltimore and later to other cities — attracting investors in 22 countries, according to one of dozens of YouTube videos starring Walsh. Investors said they paid renovation costs up front and sometimes never set foot in their new properties.

In those videos, Walsh reiterated that ABC guaranteed the first year of rental income, while advertising returns as high as 40%.

“Especially for people who are not in town,” he said in one video, “you can’t check on these renovations. You may be skeptical. You may think, ‘Hey, is the property management company really billing me for repairs that are there?’ That’s why we do brand new, complete renovations and we warranty the work.”

But dozens of investors now say much of the promised rehab work never happened.

In lawsuits, they argue ABC is a Ponzi scheme — in which cash from new investors was used to pay off older, disgruntled ones.

Walsh now waves away these suits, saying that recent litigation was orchestrated by a single embittered former client — though he declined to provide details — and that investors saw him as an easy target after the company settled one or two earlier cases.

“A lot of copy-paste lawsuits that have no merit,” is how Walsh described the flood of litigation in an interview. “When we’ve made mistakes, we’ve always tried to resolve them with people.”

Today, it is not totally clear who controls nearly 500 ABC-linked Philadelphia properties — a portfolio ranging from tidy rented rowhouses to deteriorating shells with gaping holes where the windows should be. Together, they account for close to 500 open building-code violations, and $208,000 in delinquent city property taxes, public records show.

Tenants, like Knox, described being subjected to a seeming roulette wheel of different property managers and owners, as investors cashed out and were replaced. Tenants couldn’t identify their landlords, even though it’s been more than three years since the passage of a city law, itself inspired by an ABC property, that aimed to unmask LLC stakeholders.

Dan Urevick-Ackelsberg, a lawyer with the Public Interest Law Center who has sued ABC on behalf of tenants, said the situation demands a coordinated response from the city.

“These properties are going to sit blighted and cause problems for their neighbors for a long time,” he said. “It’s kind of amazing that one person or one small group of people can have such an impact on the built condition of the poorest neighborhoods in Philadelphia.”

A city spokesperson declined a request for an interview with Department of Licenses and Inspections leaders. He said in an email that L&I enforcement is driven by complaints and the department followed its standard protocol in enforcement actions against ABC.

Over the years, Knox came to feel trapped in her home. She had applied for a Section 8 housing voucher but languished on the waiting list for years.

She never learned who her landlord was — though, a few years ago, she received a Facebook message from a man who said he was the new property manager.

Conditions didn’t improve, she said. So last year, at a loss, she called L&I. A city inspector found multiple violations. She said the property manager made minimal repairs — but in June, he told her she had 30 days to leave, alleging she was behind on her rent. She said she wasn’t, but has been fighting eviction proceedings for months.

“I felt like if I lost this, I was gonna lose the little faith that my kids had in me,” she said.

A company’s rise

In early 2018, Walsh filmed a video tour of ABC’s office, an unassuming box of a building on Marshall Street, just north of Northern Liberties.

“Everyone usually, like, Googles our address and thinks it’s some kind of shady warehouse,” he says, squinting into the sun on the sidewalk out front. “But it’s actually nice inside.”

Walsh, trailed by a cameraman, passes through a bustling sales floor, where tenants are signing leases and paying rent, into a warren of offices bursting with desks, filing cabinets, and stacks of documents. Staff are doubled up in offices: One of Walsh’s partners, Amir Vana, wearing a tracksuit, waves from a cramped space he appears to share with an IT specialist.

“We’re running outta space,” Walsh laments, heading outside to a construction trailer that houses still more employees.

The company by then was managing 1,200 properties just in Philadelphia, according to promotional materials.

For Walsh, this seeming success represented a comeback.

Walsh, according to his online bio, had first started dabbling in real estate at age 19 while still a student at Drexel University.

In 2007, Walsh incorporated Home Cash Direct, a business whose model, of turnkey real estate deals, would foreshadow ABC.

“He’d have people come on a bus and he’d take them around and show them all the properties he was buying,” recalled one investor, Tom Guerin, a North Jersey resident who first met Walsh at a real estate investment seminar. He recalls Walsh hosting clients in a swanky rented condo on the Delaware River.

Guerin said he agreed to purchase one home on 21st Street in South Philly for $30,000, paying Walsh a $5,000 “facilitator fee” and $37,000, in installments, for renovation work. He paid Walsh another $5,000 as a down payment for a vacant lot Guerin hoped to develop later.

In the coming months, Walsh sent photos that appeared to show the renovations well underway, but Guerin grew impatient. He decided to visit — and said he found only a fraction of the promised renovations were complete.

“All the photos were all fraudulent,” Guerin said.

Then, Guerin said, he discovered Walsh had never even transferred the second property into his name. He said he asked for his $5,000 back, but Walsh stopped answering his calls.

Guerin said he reported the apparent scam to Philadelphia police, but they told him it was a civil dispute. He sued in 2010, but eventually decided it wasn’t worth the legal fees. Walsh said he didn’t remember Guerin, but that the lawsuit was dropped speaks for itself.

Not long afterward, Home Cash Direct folded. It had bought up dozens of properties just before the housing market crash. Walsh was already losing properties to foreclosure when Guerin tried to take him to court.

In 2011, Walsh went through bankruptcy.

That same year, he teamed up with Vana and a third partner, Yaron Zer, to found ABC — adapting the Home Cash Direct concept to tap into a vast supply of foreign speculators seeking entry into a rebounding U.S. housing market. Both had moved to the U.S. after serving in the Israeli Defense Forces and embarked on a series of business ventures.

Vana, like Walsh, had also emerged from Chapter 7 bankruptcy — back in 2004, after work in “high-end retail boutiques” went south, he was drowning in credit card debt and, according to his filing, down to his last $500. He later drifted into the Old City club scene and by 2011 co-owned Red Sky on Market Street. But that club closed a few years later.

Walsh described his role at ABC as: “I had all the real estate experience, and I was doing a lot of everything.” Vana oversaw ABC’s construction arm, called New Philly Construction. Zer handled sales, Walsh said.

Like other wholesale investors, ABC bought at sheriff sales and carpeted the city with ads offering cash for homes, no matter the condition.

By 2015, the company had an office in Israel and an international network of recruiters that pulled investors from China, South America, Italy, and elsewhere, court records and company materials show.

In some deals, made public via lawsuits, ABC’s agents took a 12% commission from both the sale price and rehab agreement.

For instance, a settlement form for one property in Southwest Philadelphia shows that the investor bought the house for $38,000, agreed to $48,500 for renovations, and paid one of ABC’s agents a $10,380 commission.

The agreed-upon renovations, invoices filed in court show, were often not itemized, instead listing a flat price for a punch list that included entries like “demo entire home.” One $50,000 invoice states the scope of work as, simply, “Everything required to pass city required occupancy inspection.”

For a time business was very good. At its peak, ABC-linked companies were closing on over 50 new homes a month, just in Philadelphia, city records show. Then, as real-estate prices rose, ABC shifted focus to new, cheaper markets, including Baltimore where, a Baltimore Banner investigation found, the company was involved in the purchase of 700 properties.

ABC was not alone: In Philadelphia and cities across the nation, wholesalers have increasingly dominated the single-family real-estate market since the 2008 crash, with a special focus on distressed neighborhoods that are primarily home to Black and Hispanic residents, according to a recent report by Drexel’s Nowak Metro Finance Lab.

The report found such “parasitic purchasing” now accounts for a quarter of all house purchases in Philadelphia — buying out longtime property owners and outbidding would-be home buyers.

For ABC, it was lucrative.

Walsh appeared to give that impression on social media. He posted globe-trotting selfies from South America, and said he’d inked a multiyear lease on a property in Aruba with a private swimming pool and built-in waterfall.

Walsh, who earned a pilot’s license, posted a photo of himself in the cockpit of a small plane, soaring over a tropical island, flying high.

‘The lid started to come off’

The crowded Marshall Street building seen in Walsh’s 2018 video tour has one notable absence: a receptionist. Instead, a security guard is stationed at the front door.

“The first thing everybody sees is our security,” Walsh says proudly in the video. “Don’t come around here and try to mess around.”

By then, ABC was fielding complaints from many unhappy customers.

“They had too much stuff going on,” said Winston Robinson, a carpenter who worked for New Philly starting in 2013 — and said he put in 60-hour weeks, renovating four houses a month. “Everything started falling apart. The lid started to come off.”

Walsh and company cut costs by refusing to pay overtime rates and by hiring unlicensed or unqualified workers, Robinson alleged. He recalled Vana being dismissive of city building codes.

In one promotional video, Walsh listed three specific properties that ABC had “completely renovated,” with “new plumbing and electrical.” There are no public records of permits for that work.

Robinson said Vana laughed off stop-work orders from city building inspectors.

“He said, ‘My name’s Amir. I am king,’” Robinson recalled. “He said by the time he leaves Philly, he’ll own half of it.”

Another former ABC staffer, Zuma Rosario, said the company also considered the city-mandated rental licenses optional — only to be pursued in preparation for evicting a tenant. Public records show less than half of ABC-linked properties in Philadelphia ever had active licenses.

Walsh insists ABC did get licenses for units it rented.

Prospective tenants, Rosario and others said, often paid deposits before renovations were complete — but some found that work was not done by their move-in dates. One man rented an apartment only to find there was no water hook-up or a stove, and tried to get his deposit back, she said.

“Once people signed the lease and then realized the property wasn’t finished or something was wrong, they wouldn’t give them their money back,” said Rosario.

She described a constant stream of angry tenants during her time at ABC in 2017. One woman got so upset she tried to throw a cup of juice at Rosario’s boss, but hit her in the face instead.

Rosario said she came to see the company as predatory. She quit after six months.

Tenants described a bait-and-switch — as promises of decent, affordable housing yielded to dangerous living conditions.

Lenora Battle said she was initially thrilled to find a four-bedroom rowhouse overlooking Cobbs Creek Park for only $1,000 a month. She even passed the word on to her church friend, Patricia Holland, who found an ABC apartment in Southwest Philadelphia.

But Battle’s December move-in date was delayed for weeks, she said, after she discovered no heater or vents had been installed. Then, she was told the $1,000 rent was a mistake; the price was actually $1,300.

And when there were problems, they said, it was hard to know who to call.

Holland said she had property managers with four different names in four years.

“You can’t catch up with them,” Holland said. “They change. You’re here this week and then next month you’re with somebody else.”

Holland said she kept calling her landlord to fix the sagging floors that left huge ripples in the linoleum and a sizable ditch in her bedroom floor.

Then, in early 2020, Holland fell into that ditch, breaking her arm. She described crawling to the front door for help, and lifted her sleeve to show the deep scar on her shoulder, where doctors inserted a rod into her arm. The surgery kept her in the hospital for weeks, she said.

Other tenants, in lawsuits, described even graver injuries: One said a bank of poorly anchored kitchen cabinets fell on top of him; another said a window crashed down on her on a gusty day; a third alleged that a staircase collapsed, sending her plummeting into the basement below.

As for Battle, she was walking down to the basement when a step collapsed underfoot, leaving her with severe sprains. Another time, she was walking out her front door when her shoe caught on a missing piece of the front steps. She plummeted down five steps, she said, and broke her arm.

A Ponzi scheme?

By 2019, there was trouble brewing at the Marshall Street offices.

The office building Walsh once showed off on video was crumbling. City inspectors flagged it as “imminently dangerous,” and cited it for unpermitted construction and unstable exterior walls. Staff were forced to evacuate, and the building was demolished.

ABC’s financial situation had also grown dire.

While some investors were still receiving their guaranteed returns, others said the money had stopped. ABC’s rent-insurance company had gone bankrupt, Walsh said in a 2020 deposition — leaving ABC scrambling to cover the payments.

Now, some investors alleged that their properties, thousands of miles away, were unrenovated and vacant.

They started looking to get out. But, those who had fronted renovation costs to ABC were effectively underwater: stuck with unfinished buildings they could only sell at a loss on the open market.

Many found the only person who could help them recoup anything close to their initial investment was Walsh — typically, by roping a new investor into taking on the property.

In a 2019 email exchange, made public in a lawsuit, Walsh offered such a deal to cash out a Hong Kong-based investor on two Philadelphia properties — but the investor responded that he would still lose tens of thousands of dollars.

The investor wrote that he had been concealing the arrangement from his wife.

“I don’t know how to explain to her how foolish [I was] … that I have trusted your company.”

According to lawsuits, ABC sometimes blamed the stalled projects on supposed city permitting delays or chronic vandalism and burglary.

A Wayne, N.J., company, Siena Ventures, that contracted with ABC to rehab and manage 25 rental units in Philadelphia, alleged in a lawsuit that such excuses were blatant lies. In one instance, according to the lawsuit, ABC had asserted that the water heater, HVAC, and kitchen fixtures had been stolen out of a single house three different times, entailing $28,000 in cost overruns.

By the time they terminated their partnership, Siena had paid ABC nearly $750,000. Siena claimed to have spent another $400,000 ripping out and replacing defective, incomplete or unpermitted work.

Even after Siena cut ties with ABC, the lawsuit claims ABC sought to continue collecting rent on its properties, sometimes by threatening illegal evictions and, once, by allegedly breaking into a rental unit and changing the locks to rent it out to a new tenant. The case was settled out of court.

In late 2019, 33 companies owned by foreign investors accused ABC in a federal lawsuit of running an even larger racket — committing securities fraud and violating the Racketeer Influenced and Corrupt Organizations Act. The RICO suit alleged ABC had remitted less than 20% of a promised $1 million in rental proceeds. One investor claimed to have paid ABC $51,000 to renovate a property that sat, untouched, for years.

Suddenly, unhappy customers from all over the world were trading the same theory: that ABC was a Ponzi scheme on the brink of collapse.

Yet, ABC-linked companies were still leasing to unknowing tenants.

William Tyler, who rented such an apartment in 2020, took pride in his first adult apartment at age 21, after sharing a one-bedroom unit with his grandmother and brother.

But he soon came to believe the building was “not a place habitable for humans.”

On rainy days, water also poured from the light fixtures, forcing Tyler to turn his apartment into an obstacle course of buckets and takeout containers. Mushrooms and black mold peppered the interior and exterior walls, and chunks of siding fell off the rotting structure into the yard below. Tyler documented it all. What photos couldn’t capture, he said, was the “horrendous smell” and infestation “of mice, roaches, and everything else.”

His maintenance requests went unanswered, he said. There were “15 different numbers for the landlord,” each leading to a dead-end voicemail directory. By the end, he wasn’t sure who his property manager even was.

He withheld rent, hoping to spur a response. Court records show that in November 2021, the manager obtained a rental license, then filed for eviction.

The experience, said Tyler, “was horrible. It was harrowing. I felt so goddamn defeated,” he said. He’s been trying ever since to get the eviction expunged from his record.

Still in the game

Several years ago, ABC sold off its troubled property management operation altogether.

“Property management is a very difficult business,” Walsh said in an interview, “and quite honestly we weren’t good enough at it.”

However, ABC still was burdened by complicated financial arrangements that had fueled the company’s growth — including a $2 million loan from Par Funding, a now-defunct Philadelphia lender that’s been ordered to return millions of dollars after misleading investors. In 2020, a receiver that took over Par Funding’s finances sued ABC, saying it owed more than $1 million.

ABC’s attempts to settle the flood of lawsuits added to these woes. In a 2021 settlement, ABC agreed to promptly sell off an investor group’s properties and pay them $1 million in proceeds. But, according to court filings, ABC failed to do so — and, this August, it was hit with a $1.25 million judgment.

Last month, with one of the RICO lawsuits poised to go to trial, ABC and two linked companies filed for bankruptcy. ABC listed its assets as worth less than $50,000.

Walsh said the bankruptcy was a response to the many “totally baseless” lawsuits his company now faces. “Who knows when that was gonna stop?” he said.

Walsh described ABC today as more or less defunct. Its former Marshall Street address — still listed as the mailing address for LLCs that own hundreds of Philly properties — has been wiped from the map, absorbed into a neighboring condo development.

Zer is in Israel, Walsh said. Vana remains in New Jersey. Attempts to interview them were not successful.

Walsh, in a 2020 deposition, said he went to Aruba to “quarantine” at the start of the pandemic with his wife and two children — and stayed. In a recent phone interview, he said he was back in the U.S., although he recently listed his home in Northern Liberties for sale at $1.45 million.

In recent years, he has marketed several new enterprises, including a private lending company called Wall Street Wealth Management and a real estate company called Income Producing Properties, with a pitch similar to ABC’s model.

Walsh declined to disclose what he’s working on now. In an email, he made clear he has no intention of getting out of the real estate business: “I will put on my pants every morning and work 16 hours a day to continue to help investors find undervalued properties and have them generate the best returns possible. … I will continue to provide quality housing for residents of the city.”

He said he is still based in Philadelphia, though what he gave as his business address is a coworking space. He said that the office currently has no employees.

Walsh said his companies had divested from all but a few Philadelphia real estate holdings; the web of LLCs ABC created makes verifying that impossible. A spokesperson for the city said a public-facing database of rental license-holders is expected to come online “later in 2023.” But that won’t provide ownership transparency for vacant properties — or properties with licenses dating back before August of 2021.

Nearly 500 properties are still owned by companies that list their mailing addresses as the former offices of ABC or its agents. Many of them are clustered in West and North Philadelphia, sometimes two or three of them on a single block, public records show.

Some are tidy-looking rental units, while others are vacant with sagging rooflines and walls that appear to buckle and bulge. Still others feature “for sale” signs — like an Ontario Street triplex owned by one ABC-linked LLC Walsh said he retains an ownership stake in. The half-renovated building has been on the market for months, its listing photos depicting squalid conditions.

On a tree-lined block of Harold Street in North Philadelphia, where a property linked to ABC is the lone apparent vacant home, someone painted the boarded-up entrance to look like a door and hung red, green, and yellow plastic over boarded windows.

Two other enormous North Philly properties — owned by an investor who declined to be named but said that he was underwater and had no funds left to pursue renovations after his ABC deal went south — are likely to remain decaying shells indefinitely.

As for Knox, the mother of three, she said workers recently came through her rowhouse with paint and drywall. But she described their fixes as superficial. Her eviction proceedings have continued — even as she has sought relief from the city’s Fair Housing Commission.

“Here, I get sad and depressed,” she said at home in November, still wearing a mask to block mold spores. “I get overwhelmed and I’ve gotten suicidal. I’ve lost hope and faith.”

Then, miraculously, after seven years on a Section 8 waiting list, her voucher came through.

She found a new place down the block, so her kids won’t have to change schools — and is rushing to move this month, before the next cold snap.

“It feels like a new start,” Knox said.