Apple Settles Lawsuit Over Exploited Gift Card Scam

Apple has reached an agreement to settle a lawsuit accusing the tech giant of allowing scammers to exploit its gift cards, profiting from stolen funds.
Apple storeAs per a filing in federal court in San Jose, California, both Apple and the plaintiffs have arrived at substantial settlement terms subsequent to engagements with a mediator. The next step involves drafting a formal settlement for preliminary approval by U.S. District Judge Edward Davila, Reuters news report said.

The lawsuit revolves around a scam where fraudsters coerce victims, often via phone, into purchasing App Store, iTunes, or Apple Store gift cards under false urgencies, such as paying taxes, medical bills, bail, or debt collection. Despite warnings on the cards against sharing codes, victims are misled into divulging these codes.

According to the complaint, Apple allegedly deposited 70 percent of the stolen funds into the fraudsters’ bank accounts, retaining 30 percent as a purported “commission” for knowingly converting stolen codes into currency.

The complaint estimated that victims collectively lost “hundreds of millions of dollars” due to this scam, which targeted individuals who purchased gift cards redeemable on iTunes or the App Store between 2015 and July 31, 2020, and subsequently fell victim to fraud without receiving refunds from Apple.

In June 2022, Judge Edward Davila dismissed Apple’s attempt to terminate the lawsuit, affirming that the plaintiffs adequately demonstrated Apple’s alleged refusal to assume liability post-scams as unacceptable behavior, considering victims’ claims. This rejection set the stage for the current settlement discussions.