Apple agrees to settle in Apple Gift Card scam lawsuit

Apple has agreed to settle a lawsuit accusing the company of knowingly letting scammers exploit its gift cards, and keep stolen funds for itself, reports Reuters.

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. Reuters says they’re drafting a formal settlement to be presented to U.S. District Judge Edward Davila for preliminary approval.

The primary issue plaintiffs had was that gift cards could be redeemed by an unknown third party even though that third party did not purchase the card. As detailed in this Apple community forum post from 2020, one of the ways someone else can redeem a gift card you purchased usually involves a scammer copying down the number of the gift card in the store it is available from and then placing it back on the shelf. When the gift card is then purchased by an unsuspecting victim and activated at the register, the scammer already has the number of the card and can redeem the card’s value to their Apple account.

In November 2022 Fast Company reported that Apple had agreed to pay US$1.8 million to settle the lawsuit. The value of the settlement each class member receives will be up to a maximum of the face value of the gift card they purchased. However, the total value received by each claimant may be less, notes Fast Company.

In June 2022 a federal judge ruled that Apple may have financially benefitted by allowing thieves to steal gift card codes and make purchases in apps where Apple gets a cut of the proceeds, reported Courthouse News.

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, the article adds. 

“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. 

This isn’t the only glitch Apple has faced regarding gift cards. In April, the tech giant lost a court case with the New York State Department of Taxation and Finance in which it sought to avoid paying sales taxes associated with a back-to-school gift card promotion the company ran in 2011 and 2012, reports the Time Union. As a result, the company has to pay back $995,197  in taxes and interest.