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Apple has agreed to settle a lawsuit accusing the company of allowing scammers to exploit its iTunes gift cards and retaining stolen funds.
The settlement comes after Apple and the plaintiffs agreed on key terms with the assistance of a mediator. The proposed settlement is now awaiting preliminary approval from U.S. District Judge Edward Davila, as reported by Reuters on January 3.
Apple and plaintiffs lawyers have yet to respond to requests for comment. The lawsuit alleged that scammers would contact victims and convince them to purchase App Store and iTunes gift cards or Apple Store gift cards for various expenses, like taxes, hospital bills, and debt collection.
Despite warnings on the back of the cards advising against sharing codes with unknown individuals, victims were reportedly instructed to provide the codes to the fraudsters. The warning read: “Do not share your code with anyone you do not know.”
According to the complaint, Apple would deposit only 70% of the stolen funds into the scammers’ bank accounts and retain the remaining 30% as a commission for converting the stolen codes into dollars.
The lawsuit claims that victims lost hundreds of millions of dollars in the scam, particularly those in the United States who bought gift cards redeemable on iTunes or the App Store between 2015 and July 31, 2020, shared the codes with fraudsters, and did not receive refunds from Apple.
In June 2022, Judge Davila denied Apple’s attempt to dismiss the lawsuit, stating that the plaintiffs adequately alleged that Apple’s disclaimers of liability, even after victims reported being scammed, were unconscionable.
Gift cards have become an attractive target for fraudsters due to their resale value, potential for purchases, anonymity, and lack of chargeback options, according to Doriel Abrahams, head of risk at Forter.
In May, Apple reported preventing over $2 billion in fraudulent app store transactions during the previous year, marking a record level of fraud for the company.