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Yelp Sued for Defrauding Shareholders

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Photo: Yelp/Twitter

Review site Yelp, which just celebrated its ten year anniversary, has been slapped with a federal class action lawsuit. According to the San Francisco Chronicle, the lawsuit accuses Yelp executives of selling off more than $81 million in "artificially inflated stock while deceiving shareholders about the company's business practices and financial outlook." The suit alleges that shareholders were duped about the "quality of reviews" on the site: "Reviews, including anonymous reviews, appearing on the company's website were not all authentic 'firsthand' reviews, but instead included fraudulent reviews by reviewers who did not have first-hand experience with the business."

The lawsuit also claims that shareholders were deceived were deceived about business practices such as requiring business "to pay to suppress negative reviews." Before allegations of these practices were made public, the San Francisco Business Times notes, executives were able to sell off shares for a major profit. Yelp's stock "plummeted" shortly after the news. Apparently the company's CEO Jeremy Stoppelman sold over 132,000 shares during that time for $2.5 million.

Yelp tells Reuters in a statement that the allegations "are without merit" and that the company plans to "vigorously contest them." The review site has been accused of shady antics many times before. A restaurant owner in Toronto accused the site earlier this year of highlighting negative reviews and hiding positive ones because he didn't pay the website for "preferential display" on the site. A Texas-based pizzeria accused the company of similar behavior. Yelp was sued once before for having its sales reps contact businesses asking for payment to delete or hide negative reviews from their pages.

· Yelp Faces Shareholder Lawsuit [SF Gate]
· Yelp Slapped with Lawsuit [SF Business Times]
· Yelp Hit with Shareholder Lawsuit [Reuters]
· All Yelp Coverage on Eater [-E-]

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