Apple Slapped With Lawsuit Alleging Tim Cook’s Firm Benefited From iTunes Scam

Some consumers who claim to have fallen prey to the iTunes scam have filed a lawsuit against Apple, accusing the firm of benefiting from the fraudulent practice that has conned millions of dollars from its victims.

According to a class-action lawsuit filed at the U.S. District Court for the Northern District of California (spotted by Patently Apple), seven plaintiffs alleged that the Cupertino tech giant knowingly or recklessly enabled an iTunes gift card scam and benefited millions from it.

The plaintiffs alleged that Apple played a role in the scam based on the fact that it receives a 30% commission on all scammed proceeds, whether knowingly or not, and that it has “full control” and “full visibility” over all that is happening in all the steps of the iTunes gift card scam.

Moreover, the plaintiffs stated that Apple's own website dedicated to gift card scams acknowledges that the company knows that the scam “follows a certain formula” but does nothing to return even just the 30% that it receives from all the scammed proceeds. It simply tells victims that “100%” of their money is “irretrievable.”

Per Apple's website, the scam involves the victim receiving a call that instills “panic and urgency to make a payment by purchasing App Store & iTunes Gift Cards or Apple Store Gift Cards from the nearest retailer.” Once the victim buys the cards, he or she is then “asked to pay by sharing the code(s) on the back of the card with the caller over the phone.”

Here's how Apple takes part in the scam, according to the plaintiffs' accusations:

• First, the Point of Sale. The plaintiffs claim that since retailers need to communicate with Apple to activate the gift card upon purchase, the company knows when, where and in what amount the victims buy the gift card.
• Second, the Apple ID upload. Apple knows the Apple ID to which the gift card number has been uploaded. This means that the company knows who is involved in the transaction and who receives the stored value in the card.
• Third, using Stored Value. Apple knows where the Apple ID, which acquired stored value fraudulently, spends that stored value in its App ecosystem.
• Fourth, payouts. Apple pays App and iTunes store proprietors in about four to six weeks after the purchases have been made. It pays them in U.S. dollars, minus the aforementioned 30% commission it gets from every purchase.
• Lastly, the plaintiffs allege that it would be very easy for Apple to identify the Apple IDs and proprietors that benefited from such a scam, as well as the app store purchases. It can then suspend the accounts and apps.

The plaintiffs claim that Apple does nothing to return any of the money they lost to such scams. It does, however, keep 30% of all scammed proceeds, which they believe to be at least $300 million if only 10% of victims report to the FTC about it.