Gift cards scam: Apple agrees to settle lawsuit

Apple has opted to reach a settlement in a lawsuit that accused the tech giant of allegedly permitting scammers to exploit its gift cards knowingly, enabling them to misappropriate funds, with Apple allegedly retaining the stolen funds.

According to a filing on Wednesday in federal court in San Jose, California, Apple and the plaintiffs have agreed on material settlement terms after working with a mediator.

They are drafting a formal settlement to be presented to U.S. District Judge Edward Davila for preliminary approval.

According to the lawsuit, the scam involves fraudsters who instil panic or urgency by insisting through 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.”

 The filed complaint alleges that Apple, would typically deposit 70% of the embezzled funds into the bank accounts of fraudsters. Meanwhile, the remaining 30% would purportedly be retained by Apple, characterized as a “commission” for its alleged awareness and facilitation in converting stolen codes into dollars.

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Victims likely lost “hundreds of millions of dollars” in the scam, the complaint said.

The scope of the lawsuit encompasses individuals throughout the United States who, spanning from 2015 through July 31, 2020, engaged in the purchase of gift cards redeemable on iTunes or the App Store. This legal action includes those who subsequently provided the codes to fraudsters and, crucially, did not receive refunds from Apple during the specified period.

In June of 2022, Davila rejected Apple’s attempt to have the lawsuit dismissed. He said the plaintiffs had made a sufficient case that Apple’s attempt to avoid liability, even after victims reported being scammed, was unconscionable.

The case is Barrett et al v Apple Inc et al, U.S. District Court, Northern District of California, No. 20-04812.