Roomster posted fake reviews and apartment listings, lawsuit claims
The rental search website Roomster swindled customers out of millions of dollars by posting fake reviews and apartment listings which it charged users to view, a lawsuit from six states and the Federal Trade Commission alleges.
The lawsuit, filed Tuesday in the Southern District of New York, accuses Roomster executives John Shriber and Roman Zaks of targeting their fraud scheme to "students, lower-income individuals and those desperate for safe, low-cost housing in markets where such housing is extremely hard to find."
Shriber, who serves as CEO, and Zaks, the chief technology officer, are accused of paying a third-party company, AppWinn, to provide fake reviews for the Roomster website and mobile app.
The thousands of fake reviews were used to entice customers to pay for access to Roomster's rental listings, FTC officials claim.
"Roomster polluted the online marketplace with fake reviews and phony listings, making it even harder for people to find affordable rental housing," Samuel Levine, the FTC's consumer protection director, alleged in a statement. Attorneys general from California, Colorado, Florida, Illinois, Massachusetts and New York have joined the lawsuit.
California resident Jonathan Martinez, who owns AppWinn and allegedly sold the fake reviews to Roomster, is named as a defendant, but the FTC said Tuesday that Martinez has privately settled his role in the case with state prosecutors. A New York judge ordered Martinez to stop selling fake reviews, pay $100,000 total to the six states and notify Apple and Google that the reviews on their app store from Roomster were paid for.
"This matter concerns conduct that occurred in the past and is now fully resolved for Mr. Martinez," his attorney Kristin Madigan of Crowell & Moring in California said in a statement to CBS MoneyWatch.
Roomster: fake-review writer lied
Based in New York, Roomster is an online marketplace where users can find apartments and roommates. Roomster has been flooded with negative reviews this month from former users who say they paid $30 a month for the service but in return got a string of fake listings.
"I live in the most densely populated state in the country and the listings they show have been very underwhelming the past 3 times I needed to find a new place to live. It is predatory how they want $30/month just to see response messages from listings," read a review from August 19.
Roomster defended itself in a statement to CBS MoneyWatch, saying that it cooperated with an FTC investigation for two years and that the agency is now unfairly trying to pin Martinez's misdeeds on the company.
"Notably, the complaint filed today misstates key facts about Roomster's communications with Jonathan Martinez, the independent contractor who completely misrepresented his services and who is being used to paint false culpability on Roomster. We are disappointed that the FTC is forcing Martinez to take actions to potentially harm our business by contacting major app stores before a court has determined the veracity of these allegations," the statement said.
Roomster officials also said in the statement that the company has always operated with integrity and they will defend that position in court.
Prosecutors allege Shriber and Zaks have been running their scam since at least 2016 and have now duped customers out of more than $27 million. Prosecutors also said they have proof the men have been offering fake rental listings.
During an undercover investigation, FTC officials said they sent a fake listing to Roomster with an address for a commercial building along with an apartment that was half the price of other rentals in the area but twice the usual square footage. Shriber and Zaks immediately accepted and posted the listing, the lawsuit claims.
"That listing has remained active for several months," the lawsuit states. "(Shriber and Zaks) have not contacted the lister to verify the address, the specifications or the legitimacy of the email or other personal information of the lister."
The rise of fake reviews
Fake or manipulated customer reviews are a growing problem in the online economy, with companies large and small being caught trying to manipulate their online reputations in a bid to attract more consumer dollars.
Amazon is going after 10,000 Facebook groups that the retail giant claims incentivize writing fake reviews, and the FTC sent a notice last October to more than 700 U.S. companies, warning them not to engage in the practice.
Earlier this year, the FTC fined clothing store Fashion Nova $4.2 million for blocking negative customer reviews. The agency settled with Texas-based cosmetics company Sunday Riley over fake reviews posted between 2015 and 2017. A heating and air conditioning company in Georgia — Mechanic's Heating & Air Conditioning — had to pay a $1.3 million state fine in 2015 for also posting fake reviews.
All told, fake online reviews influence almost $800 billion in online spending in the U.S. every year, the World Economic Forum said.
Roomster is being sued for deceptive practices, consumer fraud and false endorsements under state and federal laws. Prosecutors said they want a judge to force Shriber and Zaks to delete the fake reviews and stop claiming Roomster has verified rental listings.
"Roomster used illegal and unacceptable practices to grow its business at the expense of low-income renters and students," New York Attorney General Letitia James claimed in a statement. "Unlike Roomster's unverified listings and fake reviews, their deceptive business practices will not go unchecked."
