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Yelp Faces Class-Action Lawsuit

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    NEWSLETTERS

    AP / File

    A site known for user-generated reviews of local businesses is being sued for misleading investors about business practices to boost share prices, according to reports.

    A class-action lawsuit was filed on behalf of Yelp shareholders by Joseph Curry, according to GigaOm, who states that the company let fake negative reviews remain on the site to get more money from local businesses.

    Curry's complaint says that Yelp touted its "quality reviews" and algorithms that weeded out "unreliable postings," but the reality is that was not the case. Instead, the complaint continued, it allowed those reviews to stay on display while the company sold the businesses ways to suppress the reviews or "make them go away", according to GigaOm.

    A Yelp employee said that the company hadn't seen the complaint but said the allegations has no merit.

    The lawsuit alleges that Yelp committed "fraud" and violated securities law and that its executives sold their stock near its high point and benefited from leaving the unreliable negative reviews on the site.
    The class-action lawsuit s gaining momentum as activist-shareholders take companies to task. We'll see if Curry gets more investors to join the lawsuit.