The FTC and Six States Sue Roomster for Fraud

Proptech firm Roomster, in which the website tells people they can “Find and rent your perfect room,” faces a big legal attack. The Federal Trade Commissions and six states—California, Colorado, Florida, Illinois, Massachusetts, and New York—have all filed suit against the company, its principals, and a third party.

Seeking a permanent injunction as well as monetary and other relief under various federal and state laws, the plaintiffs said that Roomster and owners John Shriber and Roman Zaks “allegedly duping consumers seeking affordable housing by paying for fake reviews and then charging for access to phony listings,” said an FTC press release.

“The complaint alleges that Roomster and its owners have taken tens of millions of dollars from largely low-income and student prospective renters who need reliable housing the most and can least afford to lose money,” it continued.

The complaint alleged that since at least 2016, the company, with the help of a third individual, Jonathan Martinez who was doing business as AppWinn, “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.”

Though an emailed statement from a PR firm, Roomster claimed there was “no merit to the FTC’s allegations” and called the actions “another example of the FTC’s overreach,” although it’s also an action on the part of six states as well. The company claims that it has cooperated with FTC reviews of its advertising practices “for nearly two years” and says that the filed complaint “misstates key facts” about the company’s communications with Martinez.

The FTC and states alleged that Roomster used fake reviews and listings to “get consumers to pay for access to rental information that is unverified and, in many instances, does not exist,” collecting more than $27 million in the process.

“For example, an undercover investigation shows that the Roomster Defendants immediately accepted and published a fake listing with a U.S. Postal Office commercial facility address,” the complaint said. “The fake listing also contained fictitious rental specifications that included an apartment at less than half the price and twice the square footage as those in the represented market.”

Martinez allegedly provided more than 20,000 fake reviews using more than 2,500 fake iTunes accounts. There is also allegedly email evidence showing that Roomster’s owners were directing Martinez in actions on their behalf.

The lawsuit seeks a permanent injunction against future violations of federal and state law and also monetary damages so high as likely to run will into the many millions of dollars.

Also, the FTC and states filed a proposed settlement for Martinez that makes it sound as though he is testifying against the other two. If he agrees, he’d be banned from selling reviews or endorsements, provide notifications of the fake reviews to platforms where he posted, and have to pay $100,000.

A provision says that Martinez “neither admits nor denies any of the allegations in the Complaint, except as specifically state in this Order. Only for purposes of this action, Settling Defendant [Martinez] admits the facts necessary to establish judication.”