FTC sues online listing service Roomster for defrauding customers

Dive Brief:

In a suit filed Aug. 30, New York Attorney General Letitia James and the Federal Trade Commission alleged that Roomster, a Manhattan-based online listing service for apartments and roommate matching, failed to verify listings on its site and bought and paid for tens of thousands of fake positive reviews for Roomster on various sites and app stores.
Roomster is primarily used by low-income renters and students, according to a press release on the suit. The service encourages users to pay a subscription in order to access its listings.
The suit estimates that Roomster and its principals defrauded users out of a total of $27 million in subscription fees. James, the FTC and the attorneys general of California, Colorado, Florida, Illinois and Maryland are seeking a permanent injunction against Roomster, nationwide restitution and civil penalties.

Dive Insight:

To test whether Roomster verifies its listings, investigators created a fake rental listing using a U.S. Post Office commercial facility’s address and posted it on the site. The listing remained on the site for several months, and the investigators were never once contacted to verify the details.

“There is a term for lying and deceiving your customers to grow your business: Fraud. Roomster used illegal and unacceptable practices to grow its business at the expense of low-income renters and students,” James said in the release.

Alleged fraudulent reviews

Wonderful!
Roomster is better then [sic] others. Very easy to use. Tons of listing. No scammers, all users are real. Easy to communicate with owners. In a single word FANTASTIC!

like!
I’m a student with a small budget, so I love going through Roomster for sharing my room. It makes finding roommates faster and more efficient. Roomster is a good choice for me!

Source: New York State Attorney General

Roomster CEO John Shriber and Chief Technology Officer Roman Zaks allegedly bought more than 20,000 fake reviews from Jonathan Martinez, who conducts business as AppWinn and used more than 2,500 fake iTunes and Gmail accounts to create the reviews.

The executives had given precise directions about how to post the fake reviews, including “dripping” the reviews at a slow pace and spreading out points of origin by country, according to court documents.

Martinez was also included in the suit, but has agreed to a permanent injunction and a payment of $100,000.

Roomster, which is still operational, did not respond to a request for comment.

“Roomster polluted the online marketplace with fake reviews and phony listings, making it even harder for people to find affordable rental housing,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection, in the release. “Along with our state partners, we aim to hold Roomster and its top executives accountable and return money to hardworking renters.