The controversial app - which gives users access to private profiles - has come under fire, with Instagram owners Facebook confirming plans to send a cease and desist letter to the developers.
In a statement, the social networking company said: "This app violates our terms.
"This functionality has never been available through our API [application programming interface].
"We will be sending a cease and desist letter to Ghosty ordering them to immediately stop their activities on Instagram, among other requests.
"We are investigating and planning further enforcement relating to this developer."
The service - which was downloaded more than 500,000 times since its April launch - worked by requiring users to give the app access to their own profile, while inviting their friends.
At least one friend had to join, and the app then gives access to data in those accounts, as well as any other profiles followed by those users - which includes private users with otherwise inaccessible photos and videos.
The Ghosty controversy comes after Apple removed Like Patrol - which let users monitor others' Instagram activity - from its App Store, which followed Facebook issuing a cease and desist letter as it sought to shut down the app.