Scammers offer to help iPhone developers defraud Apple

Posted:
in iPod + iTunes + AppleTV edited January 2014
Third party iPhone App Store developers have received propositions from a scammer offering to buy large volumes of their iPhone applications and then split the resulting revenue with them, apparently using fraudulent iTunes gift certificates to make the purchases.



AppleInsider has obtained an email sent to the developer of TiltMeter Pro, sent from an individual using a yahoo.com email account to the developer's customer support email address listed in the iTunes App Store. The email states, "I've been taking a look into your application and have an offer to you. I have many itunes gift certificates for itunes usa , canada and uk to make purchases through the itunes store. I can buy your product as many times as you want and can share earnings 50 - 50."



The scam attempts to exploit Apple's generous 70% revenue share of all iTunes mobile software purchases, which the company pays directly to developers. Counterfeiters have already mastered the algorithm used to generate fraudulent iTunes gift certificate numbers, but can only sell the fake certificates for pennies on the dollar, as few consumers are willing to pay anything significant for the opportunity to download free iTunes while incurring the substantial risk of being caught with a paper trail tied directly to their iTunes account.



One Chinese auction site attempting to sell generated iTunes gift certificate numbers listed an available inventory of over 77,000 codes valued at $200 each, but only appeared to be selling a few hundred at around two dollars each, netting just a couple hundred dollars. Using the counterfeit codes to buy apps instead, and then splitting the proceeds with developers, the scammers could easily syphon thousands of dollars from Apple's App Store without much effort.



Upping the value of counterfeit iTunes credits



For example, by setting up a thousand fake iTunes accounts, a scammer could offer to buy a thousand copies of a given iPhone application at the average $2 price each, resulting in $1,400 in fraudulent iTunes developer revenues, with the scammer offering to split the proceeds with the developer. That amount of money would be unlikely to tip off any suspicions at Apple, given that the company is now handling over 75 million active accounts, according to Phil Schiller in his January 2009 Macworld Expo keynote.



If the scammers understand how to manipulate the iTunes interface using automated tools, a likely scenario given their ability to counterfeit gift certificates, it should be easy to set up tens of thousands of virtual iTunes users, converting the low value gift certificate counterfeiting business into a much more lucrative scam that can generate tens of thousands of dollars per app with very little overhead and little risk to the scammer.



Scammers initially attempted to market illegitimate iTunes Gift Certificates one-by-one for pennies on the dollar.



The risk assumed by developers participating in the scam is much higher than the risk to the counterfeiters, however. Apple is likely to discover the purchasing patterns that tip-off sales as automated, resulting in offending developers losing their fraudulently obtained revenue and their ability to sell their work in iTunes. They would also find themselves facing criminal fraud charges in a case where the transactions were all clearly documented within the iTunes Store's transactions.



Unscrupulous developers might consider participating the scam, not just for a cut of the money but also to generate fake sales volumes for their applications, which could help push their titles up in the rankings and expose them to a much wider audience. The huge selection of mobile apps in iTunes makes it challenging for developers to get their apps to stand out; immediate, high volume sales over a short period of time can boost a new title into iTunes' top ten lists, a status which results in a huge boost in legitimate sales and far more overall purchases than an app could hope to achieve without reaching the critical mass needed to obtain front page promotion in iTunes.



SEO for iTunes apps



Developers are already working to discover Apple's secret algorithms used to calculate top sales rankings and use their advertising budgets for promotion of their apps as efficiently as possible, generating the types of sales traffic that results in immediate promotion within iTunes. iPhone developers have stated that being promoted within iTunes is far more effective in reaching new customers and generating sales than anything they can do to promote themselves.



Figuring out exactly how to push their apps into the spotlight is the hard part. At the recent iGames Summit, developers and game publishers noted that Apple operates its App Store as a level playing field ruled by "meritocracy," with iPhone app popularity based entirely upon how good the apps are and therefore how popular they become with users, rather than titles being promoted by Payola-style deals that sell titles based on how much the vendors pay to place their products.



This has been a boon for small indie developers, allowing them to compete against much larger software developers that might release titles with less originality and creativity, but also makes it difficult for anyone to game the system. There's so much money at stake that such gaming efforts are inevitable. These efforts to discover the rules at work behind the iTunes App Store are very similar to the "search engine optimization" that many companies offer to help web content producers gain favorable rankings for their websites in Google, resulting in many more visitors and therefore more ad revenue.



Like Google, Apple tries to keep its methods secret to prevent sites from exploiting loopholes and system vulnerabilities or simply gaming the system fraudulently. In online advertising and SEO, that has included doing things like creating huge arrays of fake websites that point to a promoted site in order to boost its search ranking in Google, or paying armies of low paid sweatshop workers in developing countries to click on ads that appear on a site. In Google's case, the scammer is trying to either fool the company into increasing the weight it assigns to a website based on worthless traffic, or to defraud Google and its advertisers into paying a site ad revenue for worthless ad requests.



The scam targeting the iTunes App Store does both at once, creating fake volumes of app sales and generating revenues for a developer based on counterfeit payments. The result of this fraud, however, could easily be a successful app launch that may actually generate significant and legitimate sales far beyond the few thousand fake sales that serve to originate the snowballing sales momentum. That might make it difficult for Apple to initially locate and identify the scam as it happens.
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Comments

  • Reply 1 of 34
    cu10cu10 Posts: 294member
    Get to it INTERPOL!
  • Reply 2 of 34
    aaarrrggghaaarrrgggh Posts: 1,563member
    I'd be pretty surprised if Apple didn't have a recovery mechanism for this in the developer agreement. I'm really surprised that this hole hasn't been patched with the fake gift cards yet though! There is serious money potentially at stake for Apple on music sales.
  • Reply 3 of 34
    citycity Posts: 522member
    Apple can scam the scammers
  • Reply 4 of 34
    magimacmagimac Posts: 1member
    These morons have missed one real important fact: iTunes cards/credits CANNOT be used to make purchases on the app store...
  • Reply 5 of 34
    rayarurayaru Posts: 2member
    Quote:
    Originally Posted by magimac View Post


    These morons have missed one real important fact: iTunes cards/credits CANNOT be used to make purchases on the app store...



    Yes, they can be....
  • Reply 6 of 34
    dr. xdr. x Posts: 167member
    Quote:
    Originally Posted by CU10 View Post


    Get to it INTERPOL!



    I just sent them a message about this and sent them the two links here at AppleInsider.



    We'll see what they say.
  • Reply 7 of 34
    Quote:
    Originally Posted by magimac View Post


    These morons have missed one real important fact: iTunes cards/credits CANNOT be used to make purchases on the app store...



    All I use is gift cards/iTunes Credit to make my purchases. This way I have a way to try to limit myself.
  • Reply 8 of 34
    quadra 610quadra 610 Posts: 6,741member
    Release the Apple ninjas.
  • Reply 9 of 34
    galleygalley Posts: 971member
    Quote:
    Originally Posted by magimac View Post


    These morons have missed one real important fact: iTunes cards/credits CANNOT be used to make purchases on the app store...



    They can be, but perhaps not in Canada.
  • Reply 10 of 34
    jeffdmjeffdm Posts: 12,946member
    Quote:
    Originally Posted by magimac View Post


    These morons have missed one real important fact: iTunes cards/credits CANNOT be used to make purchases on the app store...



    That's news to me. I've bought an app using credits from an iTunes gift card.



    I hope Apple can get this fake gift card matter addressed.
  • Reply 11 of 34
    abster2coreabster2core Posts: 2,501member
    Quote:
    Originally Posted by Galley View Post


    They can be, but perhaps not in Canada.



    Of course they can.
  • Reply 12 of 34
    alanskyalansky Posts: 235member
    I would not want to be in the shoes of anyone who gets caught trying to cheat Apple!
  • Reply 13 of 34
    This is interesting, last week two 50 dollar iTunes Gift cards were invoiced to my VISA account without my knowledge. These scammers got access to my info through Apple iTunes website, very poor response and instant chat with them. My bank is pursuing fraud case.
  • Reply 14 of 34
    deanshudeanshu Posts: 21member
    Quote:
    Originally Posted by AppleInsider View Post


    Using the counterfeit codes to buy apps instead, and then splitting the proceeds with developers, the scammers could easily syphon thousands of dollars from Apple's App Store without much effort.



    What happened to spellcheck?
  • Reply 15 of 34
    bloggerblogbloggerblog Posts: 1,796member
    Quote:
    Originally Posted by Quadra 610 View Post


    Release the Apple ninjas.



    LOL I just visualized that.
  • Reply 16 of 34
    solipsismsolipsism Posts: 25,726member
    Quote:
    Originally Posted by DeanShu View Post


    What happened to spellcheck?



    1) Why do people care so much about spelling on a tech site?



    2) Why are the initial comments about a spellchecking or word usage almost always wrong?



    3) Why don't people at least pop up a dictionary or go to Wikipedia or something to make sure that they, themselves aren't wrong or have only a limited scope of word usage and spelling before commenting?



    Oh yeah, syphon is a variant spelling of siphon. The etymology is a bit light on this word but it states that it came to Middle English from the French or Latin via Greek. This emergence from French or Latin into Middle English may be the reason why there are variant spellings as ME would use 'sy' and F/L would use 'si'. Just a guess.
  • Reply 17 of 34
    elrothelroth Posts: 1,201member
    Quote:
    Originally Posted by DeanShu View Post


    What happened to spellcheck?



    What happened to braincheck?
  • Reply 18 of 34
    Quote:
    Originally Posted by DeanShu View Post


    What happened to spellcheck?



    Quote:
    Originally Posted by solipsism View Post


    1) Why do people care so much about spelling on a tech site?



    2) Why are the initial comments about a spellchecking or word usage almost always wrong?



    3) Why don't people at least pop up a dictionary or go to Wikipedia or something to make sure that they, themselves aren't wrong or have only a limited scope of word usage and spelling before commenting?



    Oh yeah, syphon is a variant spelling of siphon. The etymology is a bit light on this word but it states that it came to Middle English from the French or Latin via Greek. This emergence from French or Latin into Middle English may be the reason why there are variant spellings as ME would use 'sy' and F/L would use 'si'. Just a guess.



    I agree. Unless it's "out of this world" bad grammar, then who cares? Plus, I believe some of the writers at AI aren't all from the US so I'd imagine there are quite a few variant spellings of words used daily. It's not a big deal! Get on to something more important and contribute to the conversation or go away.



    I think I see that daily from a few people on here. It's about as bad as the douchebags on here to constantly say... "Must be a slow news day". I'd personally like to beat you in the face with a rubber hose.



    Back to the conversation. It's not going to be hard for Apple to track this and in the end recoup the full losses from the developer. How would you like to be a developer who tries this and in 3 months of $200K sales/month (which let's say just 50% are fraud) Apple could then come-a-calling asking for their $300k back. Not too many people are willing to take that financial risk or business risk if they get kicked out of the program.



    As for the fake iTunes cards... I get so sick of China and their rampant fraud. I too have had numerous projects, designs and code stolen by that communist cesspool. Nothing against the general people themselves, but the government is quite corrupt and sometimes rather hostile. If I were Apple I'd make sure to include taking these sites down immediately when discovered if China really wants to bring the iPhone there.
  • Reply 19 of 34
    janusjanus Posts: 17member
    Quote:
    Originally Posted by bryanhauer View Post




    As for the fake iTunes cards... I get so sick of China and their rampant fraud. I too have had numerous projects, designs and code stolen by that communist cesspool. Nothing against the general people themselves, but the government is quite corrupt and sometimes rather hostile. If I were Apple I'd make sure to include taking these sites down immediately when discovered if China really wants to bring the iPhone there.



    Second. That country has some amazing, brilliant, hardworking people, but overall the society is sorely lacking in ethics. I guess the people just follow the government's example (which makes Wall Street/government collusion look like Singapore).



    I hope they enjoy being at the bottom of the U-curve of profits, because that's where they are going to stay until they learn to protect intellectual property.
  • Reply 20 of 34
    shapiro2shapiro2 Posts: 37member
    And the same day, iTunes goes up 30 cents! Go figure.
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