Santa Clara County delivered a sharp legal blow to Meta Platforms on Monday, filing a lawsuit that accuses the company of knowingly profiting from widespread fraudulent advertising on Facebook and Instagram while publicly claiming to fight scams aggressively.
The complaint, filed in Santa Clara County Superior Court on behalf of all California residents, charges Meta with violating the state’s false advertising and unfair business practices laws. Prosecutors allege the social media giant tolerated and at times enabled scam ads on a massive scale, choosing revenue over meaningful enforcement.
Citing internal documents previously uncovered by Reuters, the lawsuit claims Meta raked in as much as $7 billion a year from “high-risk” scam advertisements that bore obvious signs of fraud. Rather than cracking down, the county says Meta put in place internal “guardrails” that deliberately slowed or blocked anti-scam initiatives whenever they threatened advertising revenue.
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The suit seeks restitution for victims, civil penalties, and a court order forcing Meta to overhaul its practices and stop the alleged misconduct.
Santa Clara County paints a troubling picture of how the fraud allegedly operated. The complaint accuses Meta of allowing middlemen to sell “protected” ad accounts that were insulated from normal enforcement. It also claims the platform used its targeting tools to hit users who had previously engaged with similar scams, making them easier marks.
Testing cited in the lawsuit suggests Meta’s own generative AI tools frequently helped scammers create polished, convincing advertisements.
“The scale of Meta’s misconduct has reached an extraordinary level, and it needs to stop. As civil prosecutors in Silicon Valley, we have a special duty to hold tech companies accountable to the law,” County Counsel Tony LoPresti said.
The lawsuit turns Meta’s own public messaging against it. While the company has repeatedly told users and advertisers that fighting scams is a top priority and that ads receive strict reviews, prosecutors argue those statements were misleading and helped conceal how much fraudulent activity was fueling profits.
The filing even suggests Meta could dial scam ad volume up or down to smooth quarterly earnings or hit internal targets.
Meta rejected the allegations and said it plans a vigorous defense. Spokesperson Andy Stone stated: “This claim relies on Reuters reporting that distorts our motives and ignores the full range of actions we take to combat scams every day. 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 case carries extra weight because it comes from the heart of Silicon Valley, where Meta maintains major operations. By pursuing the suit on behalf of the entire state’s population, Santa Clara County is attempting to address alleged harms that have affected millions of Californians — particularly older adults, immigrants, and others often targeted by investment scams, fake shopping sites, and phishing schemes.
Online advertising fraud has become one of the most pervasive and costly forms of cybercrime. Victims lose billions annually, with social media platforms frequently cited as primary channels. This lawsuit highlights a growing frustration that platforms have profited handsomely from the ecosystem while shifting too much responsibility onto users and under-resourcing prevention.
Santa Clara is teaming up with prominent outside law firms, Bernstein Litowitz Berger & Grossmann, Renne Public Law Group, and Bishop Partnoy, but county officials say they will retain full control of the litigation. The firms are working on a contingency basis, meaning they only get paid if the county wins.
The lawsuit lands as Meta already faces intense global scrutiny over content moderation, youth safety, data practices, and market power. Advertising makes up the overwhelming majority of Meta’s revenue, and any successful challenge to how it polices that business could have significant financial consequences.
For years, Meta has defended itself by pointing to billions spent on safety teams, AI detection tools, and takedown efforts. Prosecutors here argue those investments have been secondary to growth, with profit considerations consistently winning out in internal decisions.
If the case advances, it could set important legal precedents about platform responsibility for third-party ads and whether profiting from foreseeable harm amounts to an unfair business practice under California law. It also adds to the steady drumbeat of accountability efforts by states and localities, filling gaps left by slower federal regulation.