If they continue to work on it and improve it, it's pure gravy for the users. If they don't then you've already gotten what you've paid for. It doesn't border on fraud at all.
Having a half-off sale a week before dropping the app isn't honest in any way. What... Google approached them yesterday and they agreed this morning? I doubt that.
More likely they've been in negotiations with Google for weeks. But it's in their best interests to move (in other words squeeze) as much product as possible before dropping the ball. Sleazy.
For all you know the next release was a paid upgrade. Would that be fraudulent too?
This was a dick move. Well within their legal rights, and it's not like they really have to worry about negative PR when they're dissolving the company, but ethically it looks pretty sleazy.
Is the app unusable after it was bought by Google?
If it is still usable, are the features of the app not worth what users paid for?
I don't think it's fair to call it fraud, but it isn't because of the numbers, but because it was sold as a computer program, not a service contract.
Then they should've put it on sale for $4.99 today, after the announcement, with a note in the description that it will no longer receive new features.
If it's indeed a deal, surely all the people who bought last week would've bought this week.
But imagine that you just bought either Sparrow a few days ago, or even worse, made it part of your workflow.
It sucks.
On the other hand, it's always an inherent danger with proprietary software. Open software gets maintained by Debian for like forever ;). I learnt that lesson after the demise of Be Inc.
"I didn't buy Sparrow thinking I was paying for a piece of software that was feature-complete. I bought Sparrow mail as a piece of innovative software along with the promise of lots of great future updates to come."
I agree with this. I bought Sparrow when it had a pretty big bug with folder management on my IMAP account. I emailed them and they fixed it in an update, but there was still lots of room for Sparrow to grow (If Apple allows them to do push, other integration with the OS like Siri, etc).
It looks like Sparrow will turn into the Gmail client for iOS, which is a shit sandwich for everyone who doesn't use Gmail.
I also suspect that the people who bought it are going to decide that the app is great, the Sparrow statement about "we will provide support and critical updates to our users" is at least something, and giving up the app for $5 is not worth it.
Either way, we're not talking about major dollars here. I'll bet most people purchased it with a credit card, and could file a claim for a refund with their card if they really felt so financially raped over the price of a beer.