Austin-based mobile advertising company Phunware, Inc., sued Uber in 2017 accusing it of breach of contract claiming $3 million in unpaid invoices, but there was much more to the story. In response to Phunware’s suit, Uber counterclaimed against Phunware, accusing it, its co-founder and CEO Alan Knitowski and several other employees of wire fraud, racketeering, transporting fraudulently obtained funds across state lines and common law fraud, seeking up to $17 million in compensation as well as additional amounts for punitive damages.
Uber indirectly hired Phunware, along with other third-party ad networks, to help Uber increase installations among consumers of its mobile app, the cornerstone of its business model. However, as the legal battle continued, evidence of widespread and continuing fraud came to light. Uber had grown suspicious of Phunware’s ad activity back in 2016, when an Uber employee raised serious concerns about Phunware’s activities on the ad campaign.
As Reed Smith confirmed in discovery, most of the Uber app installations that Phunware claimed to have delivered were generated by a fraudulent process known as “click flooding,” which reports a higher number of clicks than those occurring. Much of the ad traffic Phunware brought for Uber also came through auto-redirects, which automatically took visitors to an app store, whether the user clicked on the ad or not.