FTC Suit Alleges Roomster App Made $27M Through Fraudulent Reviews, Listings

The Federal Trade Commission filed a lawsuit against an app that purports to list apartments for rent, alleging the app had fraudulent listings and paid for fake reviews.

The suit, which was joined by attorneys general from six states, including New York Attorney General Letitia James, is seeking financial restitution for customers who paid for Roomster, which allegedly used the fraudulent practices to make $27M from customers since 2016.

"There is a term for lying and deceiving your customers to grow your business: Fraud," James said in a statement. "Unlike Roomster’s unverified listings and fake reviews, their deceptive business practices will not go unchecked. I am proud to lead this effort with the FTC to protect low-income renters and students defrauded by Roomster."

The complaint alleges Roomster Corp.'s founders, John Shriber and Roman Zaks, paid Jonathan Martinez, founder of a business called AppWin, to post a "random" number of reviews per day on the Apple and Google app stores boosting the service's image.

A spokesperson for Roomster called the lawsuit an "overreach," and said the FTC "was not sincerely interested in understand the relevant facts."

"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," the spokesperson said in a statement emailed to Bisnow. "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.”

In total, the complaint said Roomster paid Martinez for more than 20,000 reviews, which helped propel the app up the rankings for "rooms for rent" searches, among others.

The lawsuit further alleges that Roomster seeded platforms like Craigslist with fake listings that enticed users back to its app, often by targeting students or low-income renters. The lawsuit quotes Zaks as saying "a Roomster customer is an individual in the lowest end of the rental market, they generally have limited funds, and every dollar counts.”

According to the suit, the defendants continued to pay for fake reviews even after receiving notice from the FTC, and instructed Martinez to make the steady "drip" of fake reviews "seem natural."

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

Along with New York's James, attorneys general from California, Colorado, Florida, Illinois and Massachusetts joined the federal suit.

In addition to seeking a permanent injunction against Roomster and Martinez, preventing the latter from selling more fake reviews, Roomster could face civil penalties for each infraction under state laws.

UPDATE, AUG. 31, 4 P.M. ET: Comments from Roomster have been added.