A new lawsuit alleges that a now-defunct Lutherville title company collected about $1.1 million for real estate transactions arranged by ABC Capital that never took place. More than a year after it shut down, Castle Title hasn’t accounted for what happened to the money, according to the lawsuit.
The lawsuit filed last week is the latest addition to a pile of civil claims tied to ABC Capital and Castle Title that keeps growing as the Maryland Insurance Administration investigates discrepancies raised by a civil lawyer and reported by The Baltimore Banner. Investors made similar allegations against the title company in separate lawsuits last year.
ABC Capital, a Philadelphia-based company, first came under fire for not following through on renting or renovating scores of homes in distressed areas of Baltimore that it sold to out-of-state and foreign investors.
ABC’s principal, Jay Walsh, has blamed a variety of factors including the COVID-19 pandemic and unforeseen challenges in the real estate market.
But more recent allegations center on real estate transactions that lawsuits claim never occurred even though buyers wired money to Castle. Title companies are supposed to oversee and complete transactions on behalf of the buyer and seller, safeguarding each’s interests.
Castle froze its account with ABC in April 2023 and said it was conducting its own review last year. It shut down as questions mounted.
David B. Kramer, who was Castle’s president and general counsel, referred questions to his attorneys, who did not respond to multiple inquiries for this article.
ABC and Castle face dozens of lawsuits. In a criminal case filed in April, the Maryland Home Improvement Commission, a consumer protection agency within the Maryland Department of Labor, accuses Walsh of felony theft and conducting business without a license.
The criminal charges represent a fraction of the allegations made against Walsh.
Walsh appeared in Baltimore District Court last week for a trial in that case, but it was postponed until August because the court had not formally served him with paperwork.
Walsh declined to comment. He continues to offer real estate advice on social media sites under the moniker “The Real Estate Doctor.”
The Banner reported in 2022 how Walsh’s company had sold more than 1,000 homes in distressed areas to investors across the globe, promising a hands-off process in which he would acquire the homes, fix them up, and then rent them out and maintain them. But often the homes continued to lie vacant, with investors only realizing once the bottom fell out of Walsh’s business. Some lawsuits have called the operation a Ponzi scheme.
With lawsuits and complaints mounting in Baltimore and in Philadelphia, ABC Capital filed for bankruptcy in Pennsylvania in late 2022. That process recently concluded, with the trustee overseeing the case determining on June 11 that the company had no assets and was unable to pay more than $3.9 million in judgments.
The homes left in disrepair with far-flung owners have further harmed communities in Baltimore’s Black Butterfly, where dilapidated vacant homes contribute to an array of social ills.
Last week’s lawsuit was filed in Baltimore Circuit Court by a company called Winco Investment, which is incorporated in Florida and said it brokered deals for investors and was supposed to get a commission.
Winco was “persuaded by defendants ... to market and coordinate those transactions” and “never received said commissions and never received copies of the HUD-1 settlement statements for any of those transactions.”
The lawsuit added that over time “it came to Winco’s attention that these transactions — and other ongoing transactions — were fraudulent and the deeds for these transactions were never recorded.”
In total, Winco’s investors wired money for the purchase of 11 homes, ranging from $67,000 to $122,350, and received executed HUD-1 settlement statements, according to the lawsuit.
Records show the homes were sold to other individuals and entities instead — in some cases to other Walsh clients. At least one property owner said their signatures were forged on the contract documents the investors received, the lawsuit claims; in another case, the purported seller did not own the property at the time of the transaction.
“Despite due demand, Defendant Castle Title will not, or cannot account for the wrongful retention or disbursement” of the investors’ funds, the lawsuit says.
Castle Title’s duties extended to the investors “the moment funds were accepted into the trust account, and do not end until there is full accounting and return of the funds, with interest,” according to the lawsuit.
The attorney who filed the suit, Aidan Smith, declined to comment.
Thomas Valkenet, an attorney who has filed a slew of other civil cases against Castle Title and ABC Capital, said the legal process has so far been slow, and that Castle has not accounted for the funds that he says belong to his clients.
“They give the same stock response: We don’t know, and we’ve been doing an investigation for the last year. And therefore, we can’t tell you if we have your money. It’s maddening,” Valkenet said.
Some of his clients have been able to untangle their situations, Valkenet said, cleaning up some deeds recorded in the wrong names and pursuing title insurance claims for instances when title insurance was obtained.
Some investors offloaded properties to wholesalers, while others decided to lean in and salvage their interest in the homes, he said. “Many of them are actively managing and repairing the properties and being good citizens.”
