All businesses are feeling the pinch with the current economic crisis, but real estate startups seem to be struggling more than most. To make matters worse, recent actions by Roomster have left renters skittish, with the apartment marketplace company being accused of cheating apartment hunters out of millions using fake reviews and shady practices.
The actions of Roomster and its owners, John Shriber and Roman Zaks, have led to the Federal Trade Commission and six states filing a lawsuit against the company. The allegations include paying for fake reviews and charging users for access to phony listings.
Through its unsavory actions, the company and its owners duped renters in excess of $27 million. Moreover, those affected largely consisted of low-income and student renters in need of affordable housing. It is a case where the victims are those who can least afford to be cheated out of their money.
The man involved in selling the fake reviews, Jonathan Martinez, is also being held responsible for his part. The order filed against him will require Martinez to pay $100,000 and render aid in the Roomster case. It also stipulates that he must inform app stores about the reviews and stop selling reviews.
The Director of the FTC’s Bureau of Consumer Protection, Samuel Levine, said that they, along with their state partners, plan to hold Roomster and its executives accountable. That includes getting the money back to the renters cheated by the company.
The fraud perpetrated by Roomster was used to grow the business by any means necessary, with the company lying and deceiving to get ahead. Proof of this can be seen by examining how the company operates its listing service.
Roomster allows users to pay for access to listings, which include rental properties, room rentals, roommate requests, and more. Part of that service includes “verified” listings, which are meant to reassure the customers that the company has done the legwork and ensured everything is legitimate.
However, the company does not actually verify listings or ensure they are legitimate. During an FTC investigation, the company immediately accepted an address for a fake apartment. The listing was accepted and published despite the fact that the phony apartment shared the same address with a U.S. Post Office facility.
Additionally, the company has been known to advertise on the internet using fake listings to drive users to the platform. The listings get people to become paid users, only for them to discover afterward that the listings do not exist. It has also been reported that users find themselves receiving even more fake listings from fraudsters.
Such dishonest acts are highly damaging, especially when it comes to phony reviews since reviews are a vital part of ecommerce. Customers rely on reviews when choosing products and services, and while it is not uncommon to get skewed results, there is a need for trust since the products and services cannot be experienced in person.
While the FTC is quick to crack down when it notices fraud, fake reviews and deceptive endorsements can be found almost anywhere. Moreover, it is not just leaving phony positive reviews but blocking negative ones. In a world where competition is fierce, people and companies often do whatever it takes to get ahead.
Spencer Hulse is a news desk editor at Grit Daily News. He covers startups, affiliate, viral, and marketing news.
