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“Startup Robs Every Customer They Have for Thousands of Dollars Overnight” (reddit.com)
179 points by EE84M3i 50 days ago | hide | past | web | favorite | 72 comments

Sounds like a hi tech version of a scam in my city where a guy rents an apartment (or just squats it) and then turns around and sublets it and stops paying rent to the actual owner. People actually living in the unit stuck holding the bag.

Happened to me. I paid rent for a couple of months to a lady that I thought owned the appartement. Then one day someone knocked on the door, asked who I was, why I was living in his appartement, and why his tenant stopped paying rent.

In retrospect, it was eye opening how gullible everyone involved was (myself included), and how little the police did about it.

For every appartement I've since rented I checked the official register to make sure my future landlord actually owns the place...

> I checked the official register

Sorry for the stupid question, but what does this mean? How does one check this?

In my country (Austria) there is a registry (called the "Grundbuch") where the owner of every parcel of land (and buildings, appartements, etc) is formally recorded. It costs about 10€ to get a record online. You type an address, pay 10€, and the website tells you who are the owners of the land and buildings at that address.

Does it also tell you who is managing the property? At least where I live, renters deal with property managers, and very rarely the owners. It doesn't apply to houses and other single-home properties, but does for just about anything else.

In most (all?) states in the U.S., the local and/or state government has an official record of real property ownership. In some states it's available online; otherwise you may find it at the local courthouse, city hall, or county government.

How's that work? In every situation I've been in, the landlord opens the place for me, gives a tour, and eventually gives me a key.

Imagine the same thing, only it's the tenant showing off the place, not the landlord.

Scammer rents a place normally with a monthly lease, then they rent to someone else while pretending to be the landlord. Scammer collects rent while not paying the landlord and leaves before/when they're caught. A big win is if the scammer gets full payment upfront, usually by leasing short-term to someone who only needs a few months.

Landlord ends up no rent and new renter lost money and has no place to live. If scammer used a fake/stolen identity then it's practically impossible to do anything.

Why not trace renter's check that scammer cashed out through the banking system?

Geeze man, I’m sorry you had to go through that.

I’ve seen the commercial version of this scam where a guy rented out floor space at a mall, collected rent from subletting pop up vendors, and never actually paid the rent to the facility, then skipped town.

Subletting is entirely legal is it not? And it’s not a free ticket to do whatever you want with the property either.

> and stops paying rent to the actual owner

The idea is they take the sublessee's deposit and first rent payment, don't pay the owner the rent, and vanish. The sublessee has now payed deposit + rent but has nowhere to live (as the landlord is unpaid).

Right. That’s different, I misread.

This happened to my relative when someone owed her $9000 in rent. We were able to retrieve most of it via small claims court. It also helped he was dumb enough to leave bank papers behind when he was evicted so it made the process easier. A credit agency is handling the rest.

No, it depends on the contract, and usually you forbid it, at least without approval, as things can get pretty nuts. There are some real horror stories.

Whether subletting is permitted depends on the terms of the lease (and in some cases policies of a homeowners association or coop board).

"Lightspeed Venture Partners and Mucker Capital " guys might want to sort this out, the founder doesn't seem worried bout his rep but I'm sure those VCs are.

What is “the startup” in this case? What is preventing from disclosing the name of the business?

Homeshare fits the description.[1] Not finding any other articles which mention this problem, though.

[1] https://www.businessinsider.com/homeshare-rents-luxury-apart...

Twitter user complaining with a story that appears to match the Reddit description: https://mobile.twitter.com/aCUBEDtv/status/11127859103350415...

Oh, and here's an SF tenant attorney who says that California law prohibits rental agreements requiring arbitration, or waiving a jury trial.[1]

Main page for California small claims courts.[2] Some things can be done online.

[1] http://mcwrealestatelaw.com/eviction/arbitration-clause-in-y...

[2] https://www.courts.ca.gov/selfhelp-smallclaims.htm

They have 3 investors in the first and only round: https://www.crunchbase.com/organization/homeshare#section-in...

How did they manage to lose money in that business? They get paid up front, so they don't have a cash flow problem. They don't have much of an investment. There's plenty of demand. What went wrong?

It's a startup, so they probably have 20 developers and 5 business majors who are "C-levels", each getting 6 digit salaries...

As someone asked somewhere, "Why does Twitter need hundreds of developers? It's basically a CRUD interface."

What Twitter - or any large social media site - needs is a large, well-paid abuse team. Hundreds, if not thousands, of people. That'd blow through a bunch of money.

Too large sales team? Or community outreach ambassadors or whatever we call them these days.

The business model as I understand it is they pay for any missing roommates rent until the spot is filled? Maybe they had a fragmentation problem? 30 people move into 10 rooms, 10 people move out, negative 30% income.

Reddit's rules against giving out personal information, so thousands of Redditors don't bombard the startup with angry comments or worse.

The name of a company is not personal information.

It's still libellous if the company isn't the one in question.

It's 1000% homeshare, so not libel.

Mostly "wanting to use the law". You can disclose that information if you want, but you really don't want to, because you give up any legal power you might have had if you do.

If you rile up a mob (and an internet mob certainly counts), even if you don't do so directly but let "the comment section figure it out", and then don't get that content moderated, you lose whatever legal standing you might have had if the courts need to become involved. Any lawsuit you file will get thrown out immediately.

Which is why on Reddit the mods will aggressively redact any attempt to identify legal parties. You might want to name and shame, but that is a destructive desire.

What bizarro world are you living in where failing to moderate a Reddit thread causes you to lose standing? At worst you won't be able to get as good a settlement because the scammer can't pay you extra to sign a nondisclosure agreement.

Same one you live in. By not moderating a conversation you started, and instead of locking it down, allowing people to name parties and stand by while the internet mob takes shape, you are absolutely going to lose standing, and a competent lawyer will be entirely able to argue you counted on that happening.

Googling the basic contours of this shows the company pretty quickly. There are users on Twitter sharing similar stories.

Care to share your query string? I can't find it

See the comment above

Do you have a deposit protection scheme like we have the the UK? Our refundable deposits don't sit with the landlord or letting agent, they go to a separate company. At the end they release the funds unless there is some sort of damage in which case they investigate and decide whats a fair payment to the landlord.

Like a lot of such mechanisms this does have a flaw that it's not really useful for the most vulnerable people. When someone like me gets screwed by a landlord (back before I bought somewhere outright) they can invoke the protection mechanism and even threaten to go to court, but when somebody who struggles every month to find rent gets screwed this way they're focused on how they'll afford food, they don't have the time or money to fight.

Historically a lot of those people rented from their local government and so not mistreating them was a matter of government policy, subject to oversight by voters like me who certainly do have time and money. But these days it's likely to be whoever has the cheapest private rent offers. Local governments have been defunded so much they may not even have anybody left to even enforce licensing rules, so crooks who shouldn't even legally be letting properties can steal with impunity.

Courts try to help. If you get to court. But most of these vulnerable people never will.

Controlled on a city by city basis.

In chicago the land lord must tell you exactly where the money is deposited pay you interest, and provide a precise disclosure from the city (even if there’s no deposit) or the whole lease is invalid. Most land lords therefore charge non-refundable “move in fees”. Other cities are different.

At least in California, no. My experience has always been the landlord makes up any excuse at all to keep the deposit and you fight them tooth and nail. California does have a fair number of renter protection laws, but the companies rarely observe them.

My experience in California has been that the landlord didn't try to keep the deposit even when the rental contract arguably allowed them to.

This varies by state. I know at least some states do.

A venture-funded startup for putting up $1500 living room dividers that manages to run at a loss may be peak San Francisco.

I was thinking recently about Triplebyte which is paying to spam every public webpage I visit. Far as I can tell they're basically Barbizon modeling school for tech bro's.

Actually Triplebyte has been getting jobs for good hackers without credentials. That’s the opposite of what you are thinking: tech bros are from central casting and have high powered CS degrees.

Many Triplebyte alums have no degree or no formal CS training yet the test shows they are among the top software engineers in the world and deserve high salaried jobs.

Keep believing if that works for you.

I realize intimately how hard it is to get by in SF and other big cities, so I won’t criticize the renters here, but I have no such hesitation about criticizing the founding team and investors. Turning apartments into tenements could never have turned out well. How does this business scale outside of the core nimby tech cities? And even in those cities, the decentralization of the market is both good and hard to take down. One hopes those responsible are compelled to do so, but one also fears it will just be the renters left twisting.

House prices are getting pretty high on cities all over the world; there's plenty of market if they were willing to go global. The concept in itself doesn't seem to be obviously broken to me.

What’s broken is resorting to massive investment in hacky, brittle technological solutions to a policy problem that needs a political solution to address the root causes.

IMHO we live in an age where maybe some more smart people should be turning their minds towards affecting public policy.

What’s the rationale for not naming them here?

Reddit users are like a swarm of zombies sometimes. If something negative gets shared about a person or company, you can be fairly certain that there will be hundreds to tens of thousands of Redditors expressing their anger. That anger, whether deserved or not, results in everything from DDOS attacks, phonecalls from thousands of people, people contacting employees at home, death threats, etc etc.

There's also the tale of the Boston Marathon bombing, where some "over-enthusiastic" Reddit users took it upon themselves to solve the crimes based on footage from security cameras. The Reddit Detectives managed to hound and accuse the wrong people: https://www.businessinsider.com/reddit-falsely-accuses-sunil...

So Reddit is very anxious to avoid unleashing the zombie horde again, hence its very strict policies about naming companies or individuals.

That's far from a Reddit-specific thing. Granted, it occurs on Reddit, but the behavior is observed throughout all "social media."

Yes, it ties in to the outrage culture that has developed on the internet. A lot of people now seem to treat others as NPCs in a video game, to be abused or treated in any way that trips the "player's" dopamine.

I hope that it burns itself out and the web as a whole moves on from it.

Calling those who did the Boston Marathon detective work "Reddit" is like calling those who hailed the NZ mosque shooter "4chan".

I think it is worse than that. I was actually actively involved in the process of looking through those photos on /r/Boston at the time and the whole "red herring" story was not organic to that process and just seemed to be something that an outside group of trolls (maybe outside of Reddit or outside of r/Boston) decided to bandwagon and got it picked up by the media. Nobody really involved in the process really bought into it. I always feel like the "internet detectives" got a bad rap.

Maybe the lesson to be learned is that the media needs to know what they are dealing with before going with the "Reddit says" storyline.

I didn't know that, and I'm sorry that I only read this response after my comment's edit window had closed.

I did edit my post a little after reading your response. My apologies for misrepresenting the actions of a smaller subset of Redditors as being those endorsed by the entire userbase.

So that the legal advice subreddit is still full of people who want legal advice instead of just people who want to give negative PR to terrible businesses.

Probably General Rule 10 and Posting Rule 3 from https://www.reddit.com/r/legaladvice/wiki/index#wiki_general...

Edit: To clarify, I’m talking about naming them in the Reddit post. There’s already another set of comments here trying to figure out who they are.

In general, I understand and support the idea that, should your startup not go well, you fail, wrap things up, and move on. It's too big of a risk to stake your entire life on one venture, and my understanding is that VC firms, angels, and the like all understand that this can happen when they invest in a startup.

That risk is not something that is understood by most end users, where in this case "end users" includes landlords and other people "on the ground". Those people made an agreement with the startup in good faith, and I contend that faith has been violated, to the potential financial ruination of (at least) a subset of the tenants, and possibly (depending on their financial position) a fair subset of the landlords.

(It's worth noting the Reddit post was made about a day ago. In my rental agreement, for example, I would now be in violation for failing to pay rent to the landlord. I expect many of the tenants are now in that same position.)

I contend that you should not be allowing things like this to be precipitated.

Yes, I'm looking at you, YC. Yes, I'm looking at you, A16Z. And all of the other VC organizations, _and their alumni networks_. With this case serving as an example, I think you have a self-policing problem.

You might say something along the lines of "Oh, it [the startup] wasn't affiliated with any of us", or "Oh, that 'VC' isn't an actual VC", or "Oh, we didn't know them". In an instance like this, I don't think that matters. What matters is two things:

1. If not illegal, I contend that the actions of the startup (and maybe the VC) were at least highly immoral.

2. From the landlord's perspective, they see this as a startup and a VC. Maybe that's not what they actually were, but that doesn't matter. For this point, it doesn't matter what the reality was, it matters what the perception _is_.

I suggest two actions:

1. You (the same collective 'you' as above) should immediately reach out to the poster, to learn both about their tenants and to get in contact with the representative that the landlord was working with. You should then use that contact to identify other landlords where this has happened. Make the tenants whole through at least April, if not April and May.

2. Create a framework to prevent things like this from happening. I admit that I'm being _way_ to vague here, but that is because I do not have enough expertise in what you do, to make a concrete suggestion. Instead, I am calling out the problem, so that you can use your knowledge and experience to formulate a solution. For example, many of you have talked about—or otherwise targeted—basic income. Why not tackle this first.

> Make the tenants whole through at least April, if not April and May.

Are you saying that organizations that just happen to be in the same general business should be covering for the fraud of unrelated companies? Should Stanford be paying back the students of Belford University?

It depends whether your industry wants to have a good reputation or not. If you're OK with all being seen as scum who try to get whatever they can, I guess not.

Suppose an airline collapses, leaving passengers stranded. Better run airlines _could_ say "Sucks to be you, choose a better airline next time" and charge full fare to anybody stranded trying to get home. But actually they mostly don't do that, usually "rescue" fares will be offered at a steep discount to secure good will. A customer who has a now worthless $500 ticket often finds that a rival company will swap that plus $50 for a ticket home on their plane.

Actually, that exact scenario just happened with Wow! Air (Iceland discount airline)... while rival airlines have advertised so-called 'rescue fares', actually obtaining them is another story all together (at least judging from the comments on TPG[0])

[0] https://thepointsguy.com/news/these-airlines-are-offering-re...

What the fuck is the manager of a leasing office of a luxury apartment building doing posting on r/LegalAdvice?

Asking for legal advice, obviously.

Why shouldn’t they?

A large property management company should have their own lawyers, potentially in-house. This whole post sounds like they're trying to drum up support, not actually ask for legal advice.

Judging by the last couple sentences, I think they’re posting on behalf of the residents, who wouldn’t get much help from the company.

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