Report: Apple Reaches Settlement Terms on Gift Card Scam Lawsuit

Apple has reportedly agreed to settle a lawsuit that accused the company of allowing scammers to exploit its gift cards and retaining stolen funds.

The settlement was reached after Apple and the plaintiffs agreed on material settlement terms with the assistance of a mediator, and it will now be presented to U.S. District Judge Edward Davila for preliminary approval, Reuters reported Wednesday (Jan. 3).

Apple did not immediately reply to PYMNTS’ request for comment.

The lawsuit alleged that scammers would contact victims and persuade them to purchase App Store and iTunes gift cards or Apple Store gift cards to cover various expenses, such as taxes, hospital bills and debt collection, according to the report.

Despite warnings on the back of the cards not to share the codes with unknown individuals, victims were instructed to provide the codes to the fraudsters, the report said.

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, per the report.

The lawsuit claims that victims lost hundreds of millions of dollars in the scam, according to the report.

It encompasses individuals 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, the report said.

In June 2022, Davila denied Apple’s attempt to dismiss the lawsuit, stating that the plaintiffs had adequately alleged that Apple’s disclaimers of liability, even after victims reported being scammed, were unconscionable, per the report.

Gift cards have become an attractive target for fraudsters because the cards can be resold or used for purchases, provide a level of anonymity, and generally have no chargeback options, Doriel Abrahams, head of risk at Forter, told PYMNTS in an interview posted in November.

“A gift card is essentially the online world’s version of cash,” Abrahams said.

In May, Apple said that it prevented more than $2 billion in fraudulent app store transactions during the previous year. This was a record level of fraud, the company said.