Judah HeChassid (the Pious) was born around 1550 in Poland. He was powerfully affected by the aftermath of the Shabbetai Tzvi debacle. He believed that the dead Shabbetai Tzvi was, in fact, the Messiah. He expected his second appearance in 1706.
A charismatic and impressive preacher, he traveled from community to community urging total repentance, physical mortifications, and fasts. He was exactly the kind of person the rabbis feared most after Shabbetai Tzvi, and they watched him with great suspicion. Judah HeChassid carefully kept his Shabbetean leanings a secret.
Part of Judah HeChassid's message was that Jews should emigrate to the Land of Israel. Secretly, he was preparing for the Second Coming of Shabbetai Tzvi. Externally, he was encouraging Jews to resurrect the Holy Land. In 1697, he started off with 31 families of scholars to await the Messianic revelation.
Early in 1699 they left Poland for Moravia and stopped for a long time at Nikolsburg, where there were many Shabbateans. They received sympathy and support from some rabbis and wealthy men in the communities, but some opposed them and suspected Judah of being Shabbatean in secret. Emigrants from numerous circles joined the group, influenced by Judah HeChassid's fervor.
Meanwhile, Judah HeChassid spent a year traveling through Germany and Moravia gaining followers. By the time the whole group gathered in Italy, they numbered almost 1500.
They took two different routes: one through Venice and one through Constantinole. It was a terrible experience, and almost 500 people died on the trip.
They arrived in Jerusalem in on October 14, 1700 creating a variety of major crises. At that time only about 200 Ashkenazic Jews lived in Jerusalem. (There were about 1,000 Sephardic Jews.) The sudden influx of 1,000 Ashkenazic Jews created an economic crisis, because the Jerusalem community had no infrastructure or facilities to help such a large group. Imagine doubling your population overnight! To make matters worse, the new arrivals had contracted debts with their Arab guides and had been forced to offer the Turkish authorities financial guarantees from the local community in exchange for permission to enter the country. The local community didn't have the money.
Moreover, the local Ashkenazic Jews were not Shabbateans, and they viewed the newcomers with great hostility. They sent emissaries to the Council of the Four Lands for aid to fight the Shabbeteans. Help didn't arrive, but there was tremendous friction in Jerusalem.
To top off all these crises, Judah HeChassid died within days of his arrival to Jerusalem, thus depressing his followers
Matters got worse.
Arab creditors, fed up with waiting for their money, broke into the Ashkenazi synagogue in 1720, set it on fire, and took over the area. The Turkish authorities blamed Ashkenazic Jews for the mess. They refused to make a distinction between the Old Jerusalem community and the newcomers. They banned Ashkenazic Jews from the area. Anyone who looked like an Ashkenazic Jews was held responsible for the debts.
The Ashkenazic community responded with typical creativity. Some moved to other cities (mainly Hebron, Tiberius, and Tzfat). Others carefully dressed themselves in white and gold striped robes. Thus costumed, they looked to the authorities like Sephardic Jews (although the Sephardic Jews could tell the difference) and were not molested. They built a small synagogue called Churvat Yehudah HeChassid, the Destroyed Place of Judah HeChassid. That synagogue later became the chief Ashkenazic synagogue in Jerusalem. Judah HeChassid's followers can still be recognized in Jerusalem. They continue to wear the white and gold striped robes of their ancestors. They no longer have Shabbatean tendencies.
Sources: Gates to Jewish Heritage