Roomster, a social platform dedicated to apartment and roommate listings, was today (Aug. 30) sued by New York Attorney General Letitia James and the Federal Trade Commission (FTC) for fraudulent practices.
Five other states joined the lawsuit, which alleges Manhattan-based company Roomster posted fake apartment listings and bought positive reviews to scam an estimated $27 million from thousands of renters.
“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,” wrote James in a statement.
Unverified and fake listings were posted on websites like Craigslist in an attempt to convince consumers to buy Roomster subscriptions for access to links, according to the complaint filed in the Southern District of New York.
In a statement, Roomster said it spent two years cooperating with the FTC in a review of its advertising practices.
“There is no merit to the FTC’s allegations, which represent another example of the FTC’s overreach,” Roomster said in the statement.
The company also suggested the complaint misrepresented its purchasing of fake reviews, adding that the independent contractor from whom they purchased these reviews “is being used to paint false culpability on Roomster.”
The suit focused on Roomster CEO John Schriber and chief technology officer Roman Zaks, claiming the duo purchased over 20,000 fake positive reviews in order to dilute overwhelmingly negative feedback online. Schriber and Zaks specified how many reviews should be posted in certain countries and requested they be rolled out in a “drip campaign,” slowly and consistently in order to make an impact.
James and the FTC are seeking restitution for victims, civil penalties and a permanent injunction against Roomster’s fraudulent practices.
Update: This article has been updated to include comments from Roomster.
