Apple open to settle lawsuit over iTunes gift card scam

Diverting funds to itself: Apple has agreed to settle a lawsuit which accusing the company of letting scammers exploit its gift cards.

The lawsuit accuses Apple of not only knowing about the gift card scam on iTunes, but also keeping stolen funds for itself.

Apple and the plaintiffs have agreed on material settlement terms post mediation as per a filing on Wednesday in the federal court of San Jose, California.

A formal settlement will be presented to US District Judge Edward Davila for preliminary approval, Reuters reported.

Apple and lawyers for the plaintiffs did not comment on the development.

What is the scam about?

As per the iTunes gift card scam, fraudsters instil panic among victims, insisting them to buy App Store and iTunes gift cards or Apple Store gift cards for paying taxes, hospital and utility bills, bail and debt collection.

Victims are then asked to share the codes on the back of the cards, despite a warning on the card: "Do not share your code with anyone you do not know."

Apple would typically deposit only 70 per cent of the stolen funds into fraudsters' bank accounts and keep 30 per cent for itself as a "commission" for knowingly converting stolen codes into dollars, the complaint alleged.

The scam has cost victims "hundreds of millions of dollars" in the scam, as per the complaint.

Who seeks to benefit from proceedings?

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.

Davila rejected Apple's bid to dismiss the lawsuit in June of 2022, saying the plaintiffs sufficiently alleged that the Cupertino, California-based company's effort to disclaim liability, even after victims claimed they were scammed, was unconscionable.

(With Reuters Inputs)