Three Apple customers have sued the company after a fake Sparrow Wallet app allegedly stole $1.835 million in Bitcoin. The plaintiffs claim the fraudulent app appeared in the App Store despite Apple’s promises that its marketplace is safe and trustworthy.
The lawsuit was filed in the US District Court for the Northern District of California. It alleges that Apple failed to properly review and monitor apps distributed through the App Store.
Plaintiffs say fake app captured their recovery phrases
The three plaintiffs were searching for Sparrow Wallet, a legitimate Bitcoin wallet. However, Sparrow Wallet does not have an official iPhone or iPad app.
Instead, the customers allegedly downloaded a fraudulent app that impersonated the real service. The fake app then asked them to enter their wallet recovery seed phrases.
A recovery seed phrase can provide full access to a cryptocurrency wallet. Once the plaintiffs entered their phrases, the scammers allegedly transferred their Bitcoin to wallets they controlled.
The complaint says the victims lost a combined $1.835 million. One plaintiff reportedly lost about $875,000, while another lost around $840,000.
Lawsuit challenges Apple’s App Store safety claims
The plaintiffs argue that Apple’s marketing encouraged them to trust the App Store. Apple has long described its app review process as a way to protect users from harmful and deceptive software.
However, the lawsuit claims Apple did not provide enough oversight for cryptocurrency apps. It also alleges that Apple failed to give users clear warnings about fake wallet apps.
The plaintiffs are seeking compensation and punitive damages. In addition, they want the court to require stronger App Store protections and clearer cryptocurrency safety warnings.
The claims remain allegations. Apple has not yet filed a formal response to the lawsuit.
Apple says it removed Sparrow Wallet impersonators
Apple told reporters that it had removed apps impersonating Sparrow Wallet from the App Store. The company also said it terminated developer accounts linked to the fraudulent apps.
The company said users and developers can report apps that break App Store rules. Apple also pointed to its wider app-review efforts, which block or remove many misleading apps each year.
Still, the case highlights a persistent risk for cryptocurrency users. Fake wallet apps can look convincing, especially when they appear in an established app marketplace.
Users should never enter a seed phrase into an unknown app
A wallet recovery seed phrase should be treated like the master key to a cryptocurrency wallet. Anyone who obtains it can usually access and transfer the funds.
Users should download cryptocurrency wallets only through the provider’s official website. They should also confirm whether a wallet supports their device before installing an app.
In Sparrow Wallet’s case, the service is available for Windows, macOS and Linux. It does not offer an official iOS app.
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