FTC: Rental startup Roomster cheated apartment hunters out of $27M

Apartment marketplace Roomster could soon find itself evicted from the internet after being accused of cheating renters out of tens of millions of dollars.

In a complaint filed Tuesday, the Federal Trade Commission and New York attorney general Letitia James accused the startup of flooding the internet with unverified listings for rentals that in many cases did not exist.

John Shriber and Roman Zaks, Roomster’s founders and co-owners, then convinced prospective tenants to sign up for Roomster’s paid app with thousands of fake, positive reviews purchased from an online vendor, the complaint alleges.

The complaint accuses the defendants of deliberately targeting students and low-income renters in markets where low-cost housing is “extremely hard to find.” The lawsuit accuses Roomster of cheating the prospective tenants out of $27 million since 2016.

“According to the Roomster Defendants, Roomster customers are in the lowest end of the rental market, they generally have limited funds, and every dollar counts,” the complaint reads.

Alongside the FTC and James, the lawsuit was brought by attorneys general in five other states, including California, Florida and Illinois. Shriber and Zaks were individually named as defendants, as were Roomster Corporation and Jonathan Martinez, founder and CEO of the app store review vendor AppWin.

In a statement, a Roomster spokesperson denied the FTC’s allegations and said the startup would defend its business practices in court.

“We cooperated with the FTC for nearly two years in their review of our advertising practices, a process that demonstrated that the FTC was not sincerely interested in understanding the relevant facts about our marketing and advertising practices,” the spokesperson said.

The spokesperson claimed Martinez “completely misrepresented his services” and “is being used to paint false culpability on Roomster.”

To lure renters in, the complaint alleges, Roomster promoted its app as a “safe community” offering “millions of verified listings.” In reality, according to the suit, Shriber and Zaks did not vet the posts, but published them immediately so long as the platform recognized the address listed.

One fake listing, submitted as part of an undercover investigation, was for a below-market-rate apartment with the address of a U.S. Post Office facility. It remained active for months, the Aug. 30 complaint reads, and no one reached out to verify its legitimacy.

Roomster’s co-founders bought over 20,000 fake reviews from Martinez, whose website AppWin promoted its ability to “boost your app ranking,” before he became aware of the investigation, the suit alleges.

The thousands of fake five-star reviews overwhelmed the one-star ones submitted by real users.

Shriber and Zaks went on to defraud users by baiting sites such as Craigslist with posts that would direct them to Roomster to pay for more information about a rental.

“Consumers who sign up soon learn that the listings that drove them to the … platform do not exist,” the suit reads.

Some renters shelled out hundreds to thousands of dollars to nab a room sight unseen. The fraudsters frequently cited Covid as the reason they couldn’t show a property, according to the complaint.

Reddit posts dating back at least five years show consumers’ skepticism of the platform.

A 2017 comment on the subreddit r/LosAngeles warned a poster who asked about the app’s legitimacy to “Avoid Roomster like the plague,” as “most of the accounts are bots.”

A post on r/Craigslist from last September, titled “Fucking Roomster,” narrates a similar experience.

“I clicked the link, joined the Roomster, and voila! Of fucking course there is no same posting!” the user wrote. “Shitty thing is they made the posting like an real ad.”

The complaint seeks a permanent injunction against Roomster, its co-founders and Martinez, restitution for the duped consumers, and civil penalties for each violation of state law.

Roomster could be on the hook for $5,000 for each infraction in New York, $2,500 per violation in California, $20,000 in Colorado, $10,000 in Florida, $50,000 in Illinois and $5,000 in Massachusetts.

Neither Shriber nor Zaks immediately responded to a request for comment. Martinez could not be reached in time for publication.

Read more

New York

Compass loses $101M; will no longer offer equity to new agents

New York

Compass CTO is out; brokerage laying off tech employees