100% fully working as intended, per Ched.
That's right, there is no real 'matchmaking' involved. This is Ranked Warring, where your faction fights other factions based on rank alone to determine where your faction places. Just like any ranked system, unfair matchups will be common, and fully intended. Assuming both factions are similarly sized, no other factors matter - if your faction's rank is close to their faction's rank, you'll be warring them at some point, even if they're actually ten times stronger.
If we were going to change the system to match factions based on stats and activity e.t.c, the rankings wouldn't work. They'd effectively just be casual exhibition matches with no possible competition or leaderboards involved.
However, time and time again, we run into so many situations on Torn where there is clearly a miss pairing between two factions.
Just like any ranked system, we're not trying to pair you with another faction that's closely matched to your faction, we're simply matching you with a faction of a similar rank. It's pretty much as simple as that. With a limited pool of factions and matchups only occurring weekly, this will always be a problem. But I stress once again, this is how ranked systems work.
You can find Ched's post on that here:
https://www.torn.com/forums.php?p=threads&f=2&t=16375081&b=0&a=0&start=100&to=24396563
Matchups are determined by faction ranks. That's how ranked ladders work. Winning moves you up the ladder, losing moves you down the ladder.
If we want actual matchmaking - attempting to match factions only ever against very similar factions, we'd have to lose the ranked ladder as there would be no way to rank anybody, because we'd only ever know how factions deal with their very similar counterparts. It'd no longer be called "Ranked warring" as no ranks would be involved.
Referenced here:
https://www.torn.com/forums.php?p=threads&f=2&t=16380506&b=0&a=0&start=120&to=24392731
There is no 'intelligent' matchmaking, such a system is incompatible with a ranked ladder. You get matched with a faction close to your rank, and that's it.
We're not trying to match factions in terms of their capability, we're matching them by their division, so that their rank & division end up representing their capability.
Put very simply, if your faction is within +1/-1 division range of another faction, you can be matched with them, even if they're a million times stronger. That is by design, because that is how ladder systems work.
Referenced here:
https://www.torn.com/forums.php#/p=threads&f=2&t=16392320&b=0&a=0&start=60&to=24630992