Apple agrees to settle lawsuit over App Store gift card scam

Apple on Wednesday agreed to settle a lawsuit that accused the company of knowingly letting scammers exploit its gift cards while keeping stolen funds for itself.
Jonathan Stempel for Reuters:
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The scam involves fraudsters who instill panic or urgency by insisting by phone that victims buy App Store and iTunes gift cards or Apple Store gift cards in order to pay for taxes, hospital and utility bills, bail and debt collection.
Victims are then told to share the codes on the backs of the cards, despite a warning on the cards that reads: “Do not share your code with anyone you do not know.”
According to the complaint, Apple would typically deposit only 70% of the stolen funds into fraudsters’ bank accounts, and keep 30% for itself as a “commission” for knowingly converting stolen codes into dollars.
The lawsuit covered anyone in the United States who from 2015 through July 31, 2020 bought gift cards redeemable on iTunes or the App Store, provided codes to fraudsters, and did not receive refunds from Apple.

MacDailyNews Take: In June 2022, U.S. District Judge Edward Davila said the plaintiffs plausibly alleged the company did receive some of the proceeds from the fraud and failed to appropriately reimburse the victims.
“Apple stands to benefit from proliferation of the scam, that Apple is fully capable of determining which accounts redeemed the stolen gift card funds and preventing payout of those funds and that Apple nevertheless informed Martin, Marinbach, Qiu, and Hagene that there was nothing it could do for them despite those plaintiffs’ prompt notification of the theft,” Davila wrote in the 28-page decision.
Matthew Renda for Courthouse News Service:
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One of the more sophisticated grifts involves people who build their own apps within the Apple Store and then use gift cards to purchase items or services with an app that they control. In that case, by using other people’s gift cards to buy for services within their own apps, they are effectively transferring the stolen cards into money they can then possess. In these instances, Apple benefits, the plaintiffs say, because they get 30% of the cut from hosting the app, which means they are, in effect, materially benefitting from the scheme.
Plaintiffs say Apple should have access to stolen gift card codes, particularly when they are alerted to the theft promptly and should be able to prevent the purchases from going through or deactivate suspicious app accounts. They also say their stolen cards should be reimbursed.
Davila said Apple’s arguments that it could solely rely on its stated refund policy, which the customers tacitly agreed to on purchase, is insufficient.
“The court finds that Martin, Marinbach, Qiu, and Hagene have alleged facts from which it may be inferred that by refusing to refund the scammed funds, Apple prevented them from taking possession of their property and, indeed, benefitted from perpetuation of the scam,” Davila wrote.

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MacDailyNews Take: In his June 2022 decision, Davila also said that Apple’s effort to disclaim liability, even after victims claimed they were scammed, was unconscionable. Not a good look for the world’s most valuable company.
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MacDailyNews Note: The case is Barrett et al v Apple Inc et al, U.S. District Court, Northern District of California, No. 20-04812.
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