Lawsuit Hangs Over Russian Classifieds Leader Avito's Acquisition of New Homes Vertical Roomberry

The former owner of Russian primary real estate vertical Roomberry is close to being sued by his former investors for alleged fraud.

According to documents seen by local media outlet RBC, Russia-based Internet Initiatives Development Fund (IIDF) is planning to sue Mikhail Khaikin for presenting allegedly misleading revenue numbers prior to IIDF's sale of its 7% stake in Roomberry.

According to the suit, Khaikin told IIDF in June 2022 that he and the other shareholders were planning to shut down the company due to a massive anticipated loss of revenue. The fund says it will submit its complaint to the Ministry of Internal Affairs in the near future.

Roomberry relied heavily on traffic coming from Western social media such as Facebook and Instagram which were outlawed in Russia following the invasion of Ukraine and resulting Western sanctions. RBC claims to have seen a letter from Khaikin to IIDF claiming that as a result of the loss of traffic, a contract worth 80-85% of Roomberry's revenue was due to be discontinued.

In August IIDF went on to sell its 7% stake in Roomberry back to Mikhail Khaikin for 1.5 million rubles, accepting a loss of 1 million rubles ($12k) on its initial investment.

IIDF claims to have discovered that in January 2020, Khaikin registered another legal entity which ran in parallel with Roomberry and was used to conceal around half of the real estate marketplace's revenue. The lawsuit claims that this was part of a "multi-stage preparation" for the withdrawal of IIDF with minimal costs to the founders.

Contacted by RBC, Khaikin said that he had only recently learned of the suit and that he "needed time to evaluate it".

IIDF's complaint may have follow-on consequences for Russia's leading online marketplace business Avito.

In October 2022, Russian horizontal marketplace leader Avito was sold by Dutch internet giant Prosus for an estimated $2.5Bn to Kismet Capital Group, a company founded by Ivan Tavrin former CEO of the MegaFon telecoms company who has ties to the Kremlin.

In February, Avito announced the acquisition of the primary real estate vertical Roomberry from its shareholders, a group that no longer included IIDF.

A legal shadow now hangs over the Avito deal with one legal expert quoted by RBC saying that the transaction could be declared invalid with one or more parties being forced into paying reparations.