Apple Settles Lawsuit Over iTunes Gift Card Scams, Agrees to Compensation Terms

Apple has opted to settle a lawsuit accusing the tech giant of complicity in permitting scammers to manipulate iTunes gift cards, while retaining a share of the ill-gotten gains. The agreement, detailed in a filing submitted to a federal court in San Jose, California, outlines material settlement terms agreed upon by Apple and the plaintiffs, with a formal settlement awaiting preliminary approval from US District Judge Edward Davila.

The lawsuit centers around a scam involving fraudsters who employ tactics of panic and urgency, coercing victims into purchasing Apple gift cards for various fictitious reasons such as paying taxes, medical bills, bail, or debt collection. Subsequently, victims are instructed to divulge the codes on the back of these cards, despite explicit warnings against sharing such information.

The complaint alleges that Apple would typically deposit 70% of the stolen funds into the bank accounts of fraudsters, withholding the remaining 30% as a "commission" for knowingly converting stolen codes into monetary assets. The lawsuit estimates that victims likely lost "hundreds of millions of dollars" due to the scam.

The legal proceedings encompass 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. The lawsuit gained traction when, in June 2022, Judge Davila rejected Apple's attempt to dismiss the case, deeming the company's disavowal of liability, even after victims reported being scammed, as unconscionable.

As the parties work on finalizing the settlement, this legal development emphasizes the growing importance of tech giants being held accountable for consumer protection and financial security, shedding light on the potential risks associated with digital transactions and gift card usage.