Roomster Scammed Low-Income Renters Out Of $27M: NY Attorney General

NEW YORK CITY — One of New York City's most well known roommate-finding app scammed low-income users out of tens of millions of dollars by publishing fake listings and reviews, the New York Attorney's office contends.

Roomster — a Manhattan-based company that connects users to room-shares and apartments — faces a civil suit from Letitia James and the Federal Trade Commission for an alleged $27 million scam, the Attorney General announced.

"Roomster used illegal and unacceptable practices to grow its business at the expense of low-income renters and students,” James said.

“There is a term for lying and deceiving your customers to grow your business: Fraud."

Roomster emphatically denied the charges, in a written statement sent to Patch in an email, arguing they'd cooperated with the Federal Trade Commission for nearly two years.

“There is no merit to the FTC’s allegations, which represent another example of the FTC’s overreach," the Roomster spokesperson said. "We have always operated our business with honesty and integrity, and we look forward to defending our position."

The complaint Tuesday in Manhattan's federal court outlines those allegations, namely of fraud targeting students and low-income renters in Colorado, Illinois, California Massachusetts and New York.

Prosecutors contend Roomster posted fake listings that encouraged would-be users to pay for a monthly subscription to access it.

But the listings weren't verified and many turned out to be fake, prosecutors contend.

Rather than address the scam listings, Roomster executives flooded the web with tens of thousands of fake reviews, said prosecutors.

CEO, John Shriber and Chief Technology Officer Roman Zaks, bought more than 20,000 fake reviews in a scheme they called a “drip campaign,” prosecutors said.

"Wonderful!" One allegedly fake review read. "Tons of listing. No scammers, all users are real."

These reviews contrasted significantly with the real-life reviewers who tried to warn off future Roomster users, the complaint states.

"You will get scammed," one such review reads. "Every profile on here seems to be a fake profile and every message I got from people said almost exactly the same thing. Not worth it.Don’t waste your time."

Roomster blamed independent contractor Jonathan Martinez, also named in the complaint, who they said misrepresented the services he provided then pointed the finger at Roomster at the behest of the FTC.

“We are disappointed that the FTC is forcing Martinez to take actions to potentially harm our business by contacting major app stores before a court has determined the veracity of these allegations,” Roomster's spokesperson said.

Prosecutors seek to put a stop to Roomster’s fraudulent practices and receive restitution for those who used the site, they said in a joint statement.

“Roomster polluted the online marketplace with fake reviews and phony listings, making it even harder for people to find affordable rental housing,” said Samuel Levine, director of the Federal Trade Commission's Bureau of Consumer Protection.

“Along with our state partners, we aim to hold Roomster and its top executives accountable and return money to hardworking renters.”

This article was updated on Aug. 31 about 9:20 a.m. to include a response from Roomster's press representative.