California’s Santa Clara County has sued Meta Platforms , accusing the social media giant of profiting from fraudulent advertisements on Facebook and Instagram in violation of state laws.
The lawsuit, filed in Santa Clara County Superior Court on May 11, 2026 on behalf of all California residents, accuses the company of tolerating fraudulent advertising on a global basis.
The case adds to mounting scrutiny of how technology platforms handle fraudulent advertising — and whether they prioritize profit over user protection.
The Allegations: Billions in Scam Ad Profits
The county claims Meta earned as much as $7 billion annually from so-called “high-risk” advertisements that showed clear signs of being fraudulent, citing internal documents previously reported by Reuters.
According to the complaint, rather than aggressively removing fraudulent advertisers, Meta allegedly implemented internal “guardrails” to limit enforcement efforts if they threatened advertising revenue.
In other words, Meta is accused of knowingly slowing down or stopping scam ad removals because removing those ads would reduce the company’s revenue.
How Meta Allegedly Contributed to Scam Spread
The county further alleged that Meta contributed to the spread of scams by:
First, allowing intermediaries to sell ad accounts that were shielded from enforcement — creating a secondary market for scammers to buy “clean” accounts that would not be flagged.
Second, targeting users who had previously interacted with fraudulent content — meaning if you fell for a scam once, Meta would show you more scam ads.
Third, using generative artificial intelligence tools (according to Reuters reporting) to create and optimise scam advertisements, making them more convincing and harder to detect.
The Scale of Misconduct
Tony LoPresti , Santa Clara County Counsel, told Reuters:
“The scale of Meta’s misconduct has reached an extraordinary level, and it needs to stop.”
This statement reflects the county’s position that Meta’s actions are not isolated errors or occasional oversights — but a systematic pattern of prioritizing revenue over user safety.
What the Lawsuit Seeks
The county is seeking:
- Restitution (return of money gained through illegal practices)
- Civil damages (financial penalties)
- An order barring Meta from engaging in what it describes as unfair business practices
If the court finds in favor of the county, Meta could be forced to pay billions in penalties and fundamentally change how it handles scam ads.
Meta’s Response: ‘We Intend to Defend Ourselves’
Meta said it intends to defend itself against the claims. A company spokesperson said the allegations rely on Reuters reporting that “distorts our motives” and does not reflect the full scope of its anti-scam efforts.
“We aggressively fight scams on and off our platforms because they’re not good for us or the people and businesses that rely on our services,” the spokesperson added.
Meta has consistently argued that it invests heavily in content moderation, AI-based detection, and user reporting systems to remove fraudulent content.
The Reuters Internal Documents
The lawsuit relies heavily on internal Meta documents previously reported by Reuters. While the full details of those documents are not included in this article, previous Reuters reporting has revealed:
- Meta’s internal classification of “high-risk” advertising categories (including get-rich-quick schemes, fake investment opportunities, and impersonation scams)
- Quantitative models showing how much revenue came from these high-risk categories
- Internal debates about whether to crack down harder (and lose revenue) or maintain the status quo
These documents form the evidentiary backbone of the county’s case.
Generative AI and Scam Ads
The mention of generative AI tools is significant. Fraudsters are increasingly using AI to:
- Generate convincing fake profiles (with AI-generated faces)
- Write persuasive ad copy
- Create fake product images
- Chat with victims in real time (AI-powered chatbots)
If Meta’s own AI tools are being used (or repurposed) to create or optimise scam ads, the company’s liability could be much greater.
Why Santa Clara County?
Santa Clara County is home to Silicon Valley — the heart of the tech industry. The county includes cities like San Jose, Palo Alto, Mountain View, and Cupertino (Apple’s headquarters).
Filing the lawsuit here means the case will be heard in a jurisdiction familiar with tech companies and their business practices. It also means the court is located just miles from Meta’s headquarters in Menlo Park (San Mateo County).
The lawsuit was filed on behalf of all California residents , not just Santa Clara County residents, making it a statewide consumer protection action.
Legal Basis: California Advertising and Business Laws
The lawsuit alleges violations of California’s:
- Unfair Competition Law (UCL) — prohibits any “unlawful, unfair or fraudulent business act or practice”
- False Advertising Law (FAL) — prohibits misleading or deceptive advertising
- Consumers Legal Remedies Act (CLRA) — prohibits unfair methods of competition and deceptive acts
These laws allow county counsels and district attorneys to sue companies on behalf of consumers.
Previous Scrutiny of Meta’s Ad Practices
This is not the first time Meta has faced legal action over scam ads.
- In 2023, the Australian competition regulator sued Meta over scam celebrity endorsement ads.
- In 2024, UK lawmakers questioned Meta about scam ads on its platforms.
- Multiple private class-action lawsuits have been filed by individuals who lost money to scams originating on Facebook or Instagram.
However, this California lawsuit is significant because it is brought by a government entity (a county) on behalf of all residents of the state , not just individual plaintiffs.
The Challenge of Proving Intent
For the county to win, it must prove not just that scam ads existed on Meta’s platforms — but that Meta knowingly tolerated them to protect revenue.
Meta will likely argue that:
- It removes millions of scam ads every year
- Scammers are sophisticated and constantly evolve their tactics
- Perfect detection is impossible at Meta’s scale (billions of users, trillions of ad impressions)
- The “guardrails” cited by Reuters were legitimate quality-control measures, not revenue-protection schemes
The internal documents will be central to resolving this factual dispute.
Potential Remedies: What Could Meta Be Forced to Do?
If the county prevails, potential remedies could include:
- Civil penalties (up to $2,500 per violation under California’s Unfair Competition Law — potentially billions of dollars)
- Restitution to California consumers who lost money to scams
- Injunctive relief (court order requiring Meta to change its ad approval and enforcement processes)
- Independent monitoring (a court-appointed monitor to oversee Meta’s scam ad removal efforts)
Impact on Meta’s Business
Advertising is Meta’s primary revenue source. In 2025, Meta reported over $160 billion in ad revenue globally.
If the court orders Meta to implement stricter scam ad detection — and those measures reduce ad inventory or increase costs — it could impact Meta’s profit margins.
However, Meta has previously argued that removing scam ads is in its own interest because scams erode user trust, which reduces long-term engagement and ad effectiveness.
The Role of Reuters Reporting
The lawsuit explicitly cites Reuters reporting as a source for its allegations. This is unusual but not unprecedented — journalists’ investigative work has often provided the factual basis for regulatory or legal action.
Reuters has extensively covered Meta’s internal documents and practices related to scam ads. The county’s lawyers likely used Reuters’ reporting to identify key evidence and witnesses.
