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Apple agrees to settle lawsuit over iTunes gift card scam

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Apple settles lawsuit over gift card scam, facing allegations of knowingly allowing fraudsters to exploit victims, retaining stolen funds. U.S. District Judge reviews the mediated agreement. #AppleSettlement #GiftCardScam #FraudVictims

Apple (AAPL.O) has reached an agreement to settle a lawsuit accusing the company of knowingly allowing scammers to exploit its gift cards and retaining stolen funds. As disclosed in a recent filing in federal court in San Jose, California, Apple and the plaintiffs have collaboratively established essential settlement terms through mediation. The finalized settlement is currently in the process of being drafted for submission to U.S. District Judge Edward Davila for preliminary approval.

Notably, Apple has not yet responded to requests for comments from both the media and the plaintiffs’ lawyers. The legal dispute revolves around a scam orchestrated by fraudsters who manipulate victims through urgent phone calls, convincing them to purchase App Store, iTunes, or Apple Store gift cards for purported expenses like taxes, medical bills, bail, and debt settlement.

Despite warnings on the gift cards explicitly stating, “Do not share your code with anyone you do not know,” victims are coerced into divulging the codes on the cards. The complaint alleges that Apple, knowingly aware of the fraudulent activity, would typically deposit 70% of the stolen funds into the fraudsters’ bank accounts, reserving the remaining 30% as a “commission” for converting stolen codes into currency.

The financial impact on victims is substantial, with the complaint estimating losses in the “hundreds of millions of dollars.” The lawsuit extends its coverage to individuals in the United States who, between 2015 and July 31, 2020, purchased gift cards redeemable on iTunes or the App Store, shared codes with fraudsters, and did not receive refunds from Apple.

In a noteworthy development from June 2022, Judge Davila dismissed Apple’s attempt to have the lawsuit dismissed. He deemed the plaintiffs’ claims credible, emphasizing that Apple’s attempt to disclaim liability, even after victims reported being scammed, was ethically questionable.

The case, formally known as Barrett et al v Apple Inc et al, is being adjudicated in the U.S. District Court for the Northern District of California under docket number 20-04812.

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