By Jonathan Stempel
NEW YORK (Reuters) -Roomster was sued on Tuesday by the U.S. Federal Trade Commission (FTC) and six states, which accused the roommate matching service of using fake listings and reviews to take 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 complaint said 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.
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.
New York, California, Colorado, Florida, Illinois and Massachusetts joined the agency's case against Roomster and co-founders John Shriber and Roman Zaks, respectively its chief executive officer and 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.
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 https://www.ftc.gov/news-events/news/press-releases/2022/08/ftc-states-sue-rental-listing-platform-roomster-its-owners-duping-prospective-renters-fake-reviews more than 700 companies they could face significant civil fines by using fake reviews and deceptive endorsements to cheat consumers.
The case is FTC et al v Roomster Corp et al, U.S. District Court, Southern District of New York, No. 22-07389.