Rise and fall of a New York Airbnb empire

From the outside, there was nothing especially notable about the small white building on the corner of a cobblestone street in Tribeca. But until recently, it was a crucial location in a sprawling empire.

“Beautiful Loft Prime Tribeca 4BR/2BA Sleep 10,” read the listing on Airbnb for one apartment there.

Two of the three apartments in the building were popular with tourists looking to stay in one of Manhattan’s most desirable neighbourhoods — at $600 a night each, they were a bargain for a large group.

But they were also illegal — part of an elaborate real estate scheme to make millions by circumventing state and local laws and Airbnb’s own rules.

The building, on Greenwich Street, was part of a larger enterprise that made more than $20 million in revenue by unlawfully renting 130 Manhattan apartments to almost 76,000 guests through Airbnb, city officials said.

The plot was geared toward getting around city regulations that are intended to keep blocks of apartments from being turned into makeshift hotels that avoid lodging taxes and oversight.

The crackdown on the empire last month was a milestone in the escalating battle between Airbnb and New York City — the company’s largest market in the country. Airbnb condemned the exploitation of its platform, but the scheme showed how the home-sharing site has given opportunists a new kind of hustle.

Interviews and documents offer a glimpse at how the New York scheme worked. According to the suit, the ring used multiple misleading identities to dodge Airbnb’s rules, text tourists and book apartments to budget-minded travellers. Addresses were fudged to avoid scrutiny.

In all, more than 100 Airbnb host accounts and 18 corporations were created to run an illegal hotel business that stretched north from Tribeca to SoHo, Gramercy, the Upper East Side and Harlem, according to a lawsuit brought by the city.

An undated handout screenshot of the Airbnb listing for an apartment at 78 East 119th St, in East Harlem. Multiple misleading identities, more than 100 host accounts and 18 corporations were created to run an illegal hotel business in Manhattan, according to a lawsuit filed by the city. Handout via The New York Times

New York regulations are supposed to keep apartments from being pulled out of an already tight rental market to cater to the tourist trade. They specify that it is illegal to rent an entire apartment in most buildings for fewer than 30 days unless the permanent tenant is present while the renter is there.

Posting a unit that should not be listed on Airbnb is a civil offense, not a criminal one, and the city typically issues violations that can result in fines of thousands of dollars; lawsuits are filed in the most egregious of cases. In this lawsuit, the city is seeking more than $20 million from the defendants.

At the centre of the scheme was Max Beckman, 35, a former real estate broker, according to the lawsuit. Beckman, who moved to the United States 18 years ago from Israel, was one of five people accused. There has not been a verdict, and the case is continuing.

Beckman agreed to be interviewed, making clear that he believed that he did nothing wrong.

“We’re not criminals,” he said at his lawyer’s office.

In 2012, Beckman, in his own telling, was struggling to make it as a real estate broker. He said he had a dismal credit score and $100 to his name when he used that money to pay the application fee for a one-bedroom on the Upper East Side.

He began renting it out, short term, to tourists through Airbnb and pocketed the difference after paying rent. It was a simple business model he would go on to replicate.

“It took off, and I made more money, and then I got another one,” Beckman said. “I couldn’t stop.”

In 2015, Beckman quit his job as a real estate broker for Metropolitan Property Group, a brokerage firm in Manhattan, to devote himself full time to his Airbnb venture.

He persuaded two friends who were also brokers at the firm to become his partners, he said. The men, Alon Karasenty and Simon Itah, were also sued by the city. They did not respond to multiple requests for comment.

By the end of the year, the trio was managing dozens of listings on Airbnb, including large spaces in some of the city’s most sought-after neighbourhoods, according to court documents.

“We made money, we lost money, we learned,” Beckman said.

The lawsuit alleged that Beckman’s former employer, Metropolitan Property Group, and its chief executive officer, Sami Katri, along with his wife, Shely Katri, were also involved.

An undated handout screenshot of the Airbnb listing for an apartment at 385 Greenwich St, in TriBeCa. Multiple misleading identities, more than 100 host accounts and 18 corporations were created to run an illegal hotel business in Manhattan, according to a lawsuit filed by the city. Handout via The New York Times

Some of the 18 corporations that received payouts from Airbnb had been registered using Metropolitan Property Group’s office addresses. The suit also claimed the Katris’ names were linked to two Airbnb accounts and the utility bills for two apartments at 200 E. 116th St. in East Harlem, where all seven units were on Airbnb.

But Beckman said the addresses were used without the company’s knowledge and the Katris were not involved.

Douglas Pick, a lawyer for the Katris and the brokerage firm, also denied that his clients were involved and said the city has not provided any evidence that Airbnb had disbursed payments to them. He said the three men had stopped working for the firm by 2015 and had “began operating for themselves.”

Sami Katri, through his lawyer, said he had worked with Karasenty and Itah to legally lease apartments at the East Harlem building but was unaware they were rented out through Airbnb.

Yoram Nachimovsky, the lawyer representing the three men and their corporations, said the lawsuit was “a political move by the mayor.”

“Basically, the mayor is being sponsored by these hotel operators and he’s doing what’s in their best interest,” he said.

Christian Klossner, executive director of the Mayor’s Office of Special Enforcement, which led the investigation, said his office was “here to preserve housing for New Yorkers and to make sure both New Yorkers and visitors are kept safe and treated fairly.”

Airbnb has long said the majority of its hosts are everyday New Yorkers who rent out a spare bedroom or list their apartment while on a long vacation.

Still, the company has voluntarily taken down more than 5,000 commercial listings since late 2015. The city estimates that about one-third of listings on home-sharing websites are run by commercial operators; Airbnb disputes those numbers.

Under Airbnb’s “One Host, One Home” policy, New Yorkers can list only one apartment, with few exceptions.

But Beckman and his partners appear to have bypassed that policy by creating host accounts using different email addresses and multiple identities, including those of relatives and some with variations of the same name.

200 East 116th St, in Harlem, where apartments were illegally offered through Airbnb, city officials said, on Jan 28, 2019. Multiple misleading identities, more than 100 host accounts and 18 corporations were created to run an illegal hotel business in Manhattan, according to a lawsuit filed by the city. Chang W Lee/The New York Times

They also provided Airbnb with incorrect or incomplete addresses for apartments to avoid scrutiny, according to the city’s lawsuit.

Josh Meltzer, head of public policy for Airbnb in the Northeast, condemned the behavior and acknowledged the limitations of the company’s rules, which he said were intended as a short-term remedy.

“We’re talking about a very narrow set of actors that are working very creatively and very diligently,” he said. “That’s why we’ve supported what I would say is a very restrictive, comprehensive piece of legislation at the state level that would essentially require platform and government to work together to target this type of behavior.”

The city also sued five buildings for not cracking down on Airbnbs managed by Beckman and his partners despite violations issued by the city.

Abington Properties, owner of three of the buildings, did not reply to multiple requests for comment. A secretary for Helm Management, which runs an East Harlem building that became a de facto hotel, said the company did not comment on pending litigation.

Beckman said he intended to reach a settlement with the city, even if that meant paying a hefty fine. He said that, despite the lawsuit, he spoke to The Times because he thought the city had unfairly portrayed him as a criminal.

“There is nothing bad about us,” he said. “That’s why I’m happy to do this interview with you.”

© 2019 New York Times News Service