iTunes Gets Swindled

We all think of Apple as this monolithic company with high and enclosed electronic walls, far too smart for anyone to scam. Usually that's true, but every once in a while it happens, most recently with the UK iTunes store.

According a story in the The Telegraph, DJ Denver White, an unknown part-time rapper, was sudden selling on the level of a superstar like Madonna, yet without any buzz or visibility. While it's possible for someone to get a street buzz that quickly cascades into major sales, anything resembling that was nowhere to be found, which prompted an investigation.

It turned out to be a very sophisticated scam where gang members with at least 24 laptops along with thousands of stolen credit cards, purchased the music of DJ Denver from both iTunes and Amazon for six months in early 2009, which accrued royalties of nearly $1 million.

What's worse, Denver's songs were uploaded through digital aggregators Tunecore, CD Baby and SongCast, who were unknowingly caught in the operation as well.

The gang members installed a program on the computers called "Hide My IP" which was intended to disguise their location. They then used the stolen credit cards to purchase the music, which then generated a royalty for DJ Denver, which the group then divided.

The fraud was detected when someone at iTunes noticed that a part-time DJ with no marketing or record label affiliation was selling enough to be featured on the high volume sales chart. After some forensic investigation, the police were able to track them through email and Paypal accounts, since the "Hide My IP" software couldn't hide their identity as much as the crooks had hoped.

At that point iTunes stopped paying royalties, so someone named Daniel Thompson began to call Tunecore demanding payment of the outstanding royalties. Tunecore was already in touch with police, so they told Thompson they could only pay that large amount in person for tax reasons, and offered to send him a free airline ticket to come to New York to pick up the royalty check. After Thomspon sent them his address in order to have the tickets sent to his home, the police swooped in. In total, 11 gang members were charged in the crime.

So let that be a lesson. Don't even think about screwing Apple.

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