iTunes Gift Card Scams Are Flourishing

iTunes gift cards have become a common tool for online scammers to wring money out of victims, according to new warnings from Apple and U.S. federal authorities.

One agency received a deluge of complaints during a recent weekend, including word from one victim who lost $31,000 in a recent iTunes payment scam, according to the Federal Trade Commission.

The agency said the problem has grown so bad that Apple recently posted a notice on its gift card page:

“iTunes Gift Cards are solely for the purchase of goods and services on the iTunes Store and App Store. Should you receive a request for payment using iTunes Gift Cards outside of iTunes and the App Store please report it at ftc.gov/complaint.”

Apple did not immediately return a request for comment.

Criminals convince victims to buy iTunes gift cards, either online or in a store, and then email the secret code so the value can be drained — or traded.

“As soon as you put money on a card and share the code with (scammers), the money’s gone for good,” the FTC warned in a blog post.

Karen S. Hobbs, an attorney with Federal Trade Commission’s Bureau of Consumer Protection, said scammers like iTunes gift cards because they are “cash-like” in a few critical ways. It’s pretty hard to reverse an iTunes payment — unlike a credit card payment — and movement of iTunes dollars can be virtually untraceable. (See more reasons consumers fall for scams here.)

With any fraud scheme — from sweetheart scams to fake IRS tax bill scams — a criminal’s biggest challenge is getting paid. Wire service payments are their preferring method, because wire payments are generally impossible to reverse. But apparently consumers are slowly heeding warnings about wire services, leading criminals to turn to other payment methods.

iTunes gift cards aren’t the only alternate money system scammers have adopted. The FTC warns that they are using Amazon gift cards, PayPal, reloadable cards like MoneyPak, Reloadit and Vanilla, too.

Of course, criminals aren’t using the iTunes gift cards to feed their voracious appetite for music. They sell the cards on thriving gift card black markets, where iTunes cards — all cards, really – can sell for pennies on the dollar. Still, that gives criminals a great way to receive funds from victims and quickly cash them out.

“I think most people are surprised about the black market for iTunes cards,” Hobbs said.

It seems a bit far-fetched that consumers would believe the IRS, or any government agency, would ask for payment via iTunes “bucks.” But clearly, people are falling for the tactic.

“In some cases, (criminals) stay on the phone (with victims) while they go to the store and buy the gift cards, talk them through it,” Hobbs said.

The trend is international, too. Here’s a story about a similar tactic working in the United Kingdom: a criminal tricks a victim into believing she has a big tax bill that must be paid immediately.

“One victim is revealed to have purchased over 15 iTunes gift cards from Argos – each one valued at £100 – and handing over the codes to scammers on the phone. Another victim shelled out an incredible £15,000 on iTunes gift cards after receiving a cold call, the codes for which went straight to criminals,” TrustedReviews.com wrote on Friday.

One reason these scams might be working: Apple and iTunes are both recognizable brands, and criminals may be borrowing a bit of their “halo effect” to gain credibility.

So the big message the agency is trying to deliver is simple: “If you’re not shopping at the iTunes store, you shouldn’t be paying with an iTunes gift card,” the FTC says.

iTunes Gift Card Scams Are Flourishing

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