Unfortunately, scams like this aren't new on the App Store. Ever since the App Store has been around there's been seedy apps perpetrating to do things that just aren't possible. You just have to do a search for apps like "location trackers" to see how widespread it is.
I saw this particular app in the Top 100 around 2 months ago, and noticed it had an average rating of 1 star, how this has evaded being on Apple's radar for this long is beyond me.
Apple has taken a lot of flak for being too stringent and strict with the App Store review process, but this is one area the whole process was designed to fix. This is literally a case of a single guy falsely advertising his app and, by all accounts, having hundreds of thousands people fall for it and pay $1.99 for the privilege of being screwed.