Patently Apple posted a legal report in July 2020 titled “An 11-Count Class Action has been filed against Apple for Recklessly Enabling an ongoing "iTunes Gift Card Scam." The report noted that the group claimed that Apple knowingly or recklessly enabled an iTunes gift card scam. All those listed as bringing the Class Action forward were victims of the iTunes gift card scam. The Plaintiffs state that Apple falsely tells victims that 100% of their money lost in the scam is irretrievable and this isn't true. Further, the lawsuit claims that Apple has retained hundreds of millions of dollars in commissions in this scam that should be paid back to those who were victims in this highly sophisticated iTunes Gift Card Scam.” See our 2020 report for the full court document.  

According to a report filed yesterday, Apple will have to face claims that the company profited off of criminal enterprise schemes featuring stolen gift cards after a federal judge declined to dismiss claims the company benefitted monetarily from sophisticated schemes that employ fake apps to swindle consumers.

U.S. District Judge Edward Davila dismissed some of the claims from a class of plaintiffs that said Apple aided in the fraudulent schemes, but he did say plaintiffs plausibly alleged the company did receive some of the proceeds from the fraud and failed to appropriately reimburse the victims.

“Apple stands to benefit from proliferation of the scam, that Apple is fully capable of determining which accounts redeemed the stolen gift card funds and preventing payout of those funds and that Apple nevertheless informed Martin, Marinbach, Qiu, and Hagene that there was nothing it could do for them despite those plaintiffs’ prompt notification of the theft,” Davila wrote in the 28-page decision.

The ruling is a big win for plaintiffs who can now proceed to the discovery phase, despite having the bulk of their fraud claims against the large Silicon Valley company thrown out. It is not a finding of guilt on behalf of Apple.

Gift card scams are an increasing problem, an issue that is not in dispute in the present case. The Federal Trade Commission estimates criminals stole $30 million through gift card scams in 2020 alone. The previous year, it was an estimated $24 million.

In the case of Apple, the scam typically centers on iTunes gift cards, or gift cards for the Apple App store. These account for about a quarter of all reported gift card thefts in the United States.

Davila said Apple’s arguments that it could solely rely on its stated refund policy, which the customers tacitly agreed to on purchase, is insufficient.

“The court finds that Martin, Marinbach, Qiu, and Hagene have alleged facts from which it may be inferred that by refusing to refund the scammed funds, Apple prevented them from taking possession of their property and, indeed, benefitted from perpetuation of the scam,” Davila wrote. For more, read the full report by Courthouse News Service.