FTC California lawsuit
Part of Roomster’s home page, which displays reviews, including one on left from a purported San Diego user. Photo credit Screen shot, Roomster.com

Roomster was sued on Tuesday by federal officials and six states, including California, which accused the roommate-matching service of using fake listings and reviews.

The misleading posts, the Federal Trade Commission and state authorities argue, led Roomster – an app to link those seeking to share homes and apartments – to benefit, by receiving more than $27 million from people often struggling to find affordable places to live.

According to a complaint filed in Manhattan federal court, Roomster and its co-founders have since 2016 “inundated the internet with tens of thousands of fake positive reviews to bolster their false claims that properties listed on their Roomster platform are real, available and verified.”

The suit alleges that those harmed were typically lower-income renters and students, with many lured into paying even more money to fraudsters who flooded New York-based Roomster’s platform with their own fake listings.

“Millions of hardworking Californians are struggling to find housing within their budgets. When people see affordable rooms for rent on highly rated apps like Roomster, they trust that these ‘verified’ listings are what they say they are,” said the state’s Attorney General Rob Bonta. “Unfortunately, Roomster hasn’t been honest about the source of its popularity or its commitment to preventing fraud on its app.”

Roomster, in a statement, said the accusations have no merit and “represent another example of the FTC’s overreach.”

Tuesday’s lawsuit is part of an FTC crackdown on fake reviews and deceptive endorsements.

In addition to California, New York, Colorado, Florida, Illinois and Massachusetts joined the FTC’s case against Roomster and co-founders John Shriber, the chief executive officer, and Roman Zaks, the chief technology officer.

A fourth defendant, Jonathan Martinez, was accused of selling more than 20,000 fake reviews to Roomster, with Shriber instructing him to produce “lots of 5 star IOS app reviews” and saying he “would like to be #1” for people seeking roommates.

“There is a term for lying and deceiving your customers to grow your business: fraud,” New York Attorney General Letitia James said in a statement.

The lawsuit seeks civil penalties and an injunction against violations of federal and state unfair trade laws, including the False Advertising Law and Unfair Competition Law.

In its statement, Roomster said it has always operated with honesty and integrity, and the FTC was “not sincerely interested” in understanding its marketing and advertising practices.

Martinez, who ran the business AppWinn, reached a $100,000 settlement and agreed to cooperate with regulators. His lawyer did not immediately respond to requests for comment.

Last October, the FTC warned more than 700 companies they could face significant civil fines by using fake reviews and deceptive endorsements to cheat consumers. Each offense could incur a penalty of nearly $44,000, officials said.

The Roomster case is FTC et al v Roomster Corp et al, U.S. District Court, Southern District of New York, No. 22-07389.

(Reporting by Jonathan Stempel in New York; editing by Bill Berkrot and Josie Kao)

Reuters and staff reports



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Ellen Bullock