Apple Reaches Settlement In Lawsuit Over Scammers Exploiting Gift Cards

The lawsuit revolves around a scam involving fraudsters who create a sense of panic or urgency through phone calls, urging victims to purchase App Store and iTunes gift cards.

Apple allegedly deposited only 70 per cent of the stolen funds into the bank accounts of fraudsters.

Apple has reached a settlement in a legal dispute where the company was accused of allowing scammers to exploit its gift cards knowingly while retaining stolen funds. The agreement was disclosed in a filing on Wednesday in a federal court in San Jose, California, indicating that both Apple and the plaintiffs have agreed on significant settlement terms following discussions with a mediator. The parties are now in the process of drafting a formal settlement, which is expected to be presented for preliminary approval to US District Judge Edward Davila.

Requests for comments from Apple and the plaintiffs' lawyers have not been immediately answered.

The lawsuit revolves around a scam involving fraudsters who create a sense of panic or urgency through phone calls, urging victims to purchase App Store and iTunes gift cards or Apple Store gift cards to settle purported taxes, hospital bills, utility bills, bail, or debt collection. Despite warnings on the cards advising against sharing codes with unknown individuals, victims are coerced into divulging the codes.

According to the complaint, Apple allegedly deposited only 70 per cent of the stolen funds into the bank accounts of fraudsters, while retaining 30 per cent as a "commission" for knowingly converting stolen codes into currency. The complaint estimates that victims incurred losses in the range of "hundreds of millions of dollars" due to the scam.

The lawsuit encompasses individuals in the United States who, between 2015 and July 31, 2020, purchased gift cards redeemable on iTunes or the App Store, provided codes to fraudsters, and did not receive refunds from Apple. In June 2022, Judge Edward Davila rejected Apple's attempt to dismiss the lawsuit, stating that the plaintiffs had adequately alleged that Apple's disclaimers of liability, even after victims reported being scammed, were unconscionable.