Lawsuit Over "Fraudulent Ads" Shakes Meta—Can Facebook and Instagram Protect Victims?

When we open Facebook or Instagram, we often overlook ads as "annoyances." But what if those ads were targeting the elderly or financially insecure individuals, leading them to fake benefits, fraudulent investment schemes, or false medical insurance perks? And what if the revenue from these ads became part of the massive profits of platform companies? The issue then becomes more than just a "failure in ad review."

The lawsuit filed by Santa Clara County, California, against Meta questions exactly this point. The focus is on fraudulent ads on Facebook and Instagram, operated by Meta. The lawsuit claims that Meta failed to adequately eliminate fraudulent ads despite being aware of their existence, thereby endangering elderly and vulnerable users while simultaneously profiting from them.

Criticism of Meta regarding fraudulent ads is not new. In 2025, Reuters reported, based on internal documents, that Meta might have been earning significant revenue from ads related to fraud and prohibited products. Furthermore, in April 2026, the Consumer Federation of America filed a lawsuit, accusing Meta of misleading consumers by overstating its efforts against fraudulent ads. The current lawsuit by Santa Clara County is noteworthy as a case where a local government directly challenges Meta's advertising business amid this series of events.

The Question Isn't "How Many Ads Were Removed"

Meta argues that it is not neglecting fraud prevention. The company explains that it has removed a large number of fraudulent ads and is working with law enforcement agencies. According to an article by Engadget, Meta claims that the "Reuters report distorts motives" and insists that it is fighting fraud daily.

However, the lawsuit raises a more fundamental question beyond just "how many ads were removed." It questions whether Meta's advertising system itself might be structured in a way that preserves fraudulent ads.

According to Santa Clara County's claims, Meta may have continued to allow advertisers with apparent risks to remain on the platform instead of uniformly eliminating suspicious advertisers. There is also a suggestion that users who have clicked on fraudulent ads in the past are more likely to see similar ads again. If true, this creates a very dangerous cycle where those most vulnerable to fraud are more likely to encounter fraudulent ads again.

The advertising business thrives by delivering ads tailored to users' interests and behavioral history. However, when this precise targeting technology is used for fraud instead of legitimate products, to what extent should the platform be held accountable? This lawsuit questions that boundary.

A Shocking $7 Billion from "High-Risk Ads"

A significant backdrop to the lawsuit is the internal document report by Reuters. The report suggests that Meta anticipated substantial revenue from ads related to fraud and prohibited products in 2024, accounting for a large portion of its total revenue. The Santa Clara County lawsuit claims that Meta may have earned up to $7 billion annually from so-called "high-risk" fraudulent ads.

Of course, this is an allegation in a lawsuit, and Meta denies intentionally accepting fraudulent ads. However, the scale of the figures is so large that the debate goes beyond mere content moderation failures. The focus is on the business decisions of the giant platform itself, including ad review, algorithms, revenue targets, and the prioritization of user protection.

The particularly concerning point is whether Meta faced a dilemma where "eliminating fraudulent ads would impact revenue." If part of the ad revenue depended on fraudulent advertisers, the company would have little incentive to actively cut them out. The lawsuit targets precisely this issue.

Medicare Fraud Ads Targeting the Elderly

What makes the issue even more serious is the existence of fraudulent ads targeting the elderly. The Center for Countering Digital Hate has investigated Medicare-related fraud ads on Facebook, pointing out that Meta earned significant revenue from such ads.

Medicare is an important public health insurance system for the elderly and disabled in the U.S. Ads exploiting this system, with promises like "receive free benefits" or "get a card for groceries, rent, or gas," prompt users to input personal information, leading to more than just financial harm. It could result in misleading users into incorrect health insurance plans or worsening access to necessary treatments.

Moreover, there has been an increase in ads using AI-generated celebrity images or deepfake-style videos. For users, distinguishing between genuine endorsements and fraudulent ads is becoming more difficult. As technology advances, the difficulty of ad review also increases. However, this does not excuse the platform's responsibility. In an era where AI can mass-produce fraudulent ads, companies operating ad distribution systems are required to have a stronger accountability.

Social Media Reactions: "It's Not Just Meta's Problem"

On social media, there are many critical reactions to the lawsuit. In Reddit's technology community, comments like "Meta has repeatedly caused problems" and "Google and YouTube should be investigated next" are prominent. One user pointed out that YouTube also has many suspicious ads related to health, cryptocurrencies, and dating, arguing that the issue is not limited to Meta.

In Facebook-related communities, there are more personal posts. Stories of accounts being hijacked and ad managers being misused, or complaints about clearly illegal-looking ads being reported but not deemed a "policy violation," are being shared. These voices indicate a strong distrust among users towards Meta's review and support systems.

There are also complaints from the perspective of advertisers. While legitimate advertisers struggle with strict reviews and account suspensions, they feel the contradiction of why fraudulent ads continue to be displayed. This is a serious trust issue for the platform. It undermines the health of the advertising market not only for users but also for legitimate advertisers.

On Threads, Bluesky, and X, the issue of Meta's fraudulent ads is being shared through news articles and journalist posts. Particularly, posts by journalists involved in Reuters reports and tech journalists are gathering discussions about Meta's internal documents and responses to ad regulations. Observing the overall reaction on social media, this lawsuit is not just a local U.S. news story but is being perceived as an international issue questioning "to what extent should giant platforms be responsible for ad-related harm."

How Credible Are Platform "Safety Declarations"?

Meta has emphasized ad removal, advertiser review, AI-based detection, and cooperation with law enforcement as part of its fraud ad measures. Indeed, with a vast number of ads being submitted worldwide, it's nearly impossible to manually check them all. Fraudsters also change expressions, accounts, images, and links to evade detection. It is likely true that Meta has removed many fraudulent ads.

However, for users, the important factor is not just "how many were removed." The issue is how many fraudulent ads were prevented before being displayed, how quickly the platform responded after harm occurred, and whether it could prevent the same advertisers or methods from recurring.

If a platform claims "we are taking safety measures" while internally limiting those measures due to revenue impact, it becomes a significant consumer protection issue. The lawsuits by Santa Clara County and the CFA are questioning this gap between "external explanations" and "internal realities."

Section 230 and the Limits of Platform Responsibility

In the U.S., Section 230 of the Communications Decency Act is frequently discussed when considering the responsibility of platform companies. This provision is known for making it difficult to hold online services liable as publishers for content posted by third parties. In the early days of the internet, it played a role in preventing small services from facing excessive litigation risks due to user posts.

However, Meta today is not a small service. It operates a massive advertising ecosystem, including Facebook, Instagram, and WhatsApp, deeply involved in determining ad targets, delivery frequency, targeting, and advertiser management. It is not merely hosting third-party posts but designing, selling, and optimizing ads as a product.

Therefore, the responsibility debate over fraudulent ads differs from regular post content. Ads are a revenue source for Meta, and Meta itself provides distribution functions to advertisers. The lawsuit questions precisely this point: if the ads were distributed through Meta's advertising system and Meta profited from them, should the platform bear a heavier responsibility?

It's Not Just an American Issue

Although this lawsuit is occurring in the U.S., it is not unrelated to Japanese users. In Japan, issues such as investment fraud through SNS ads, ads misusing celebrity images, fake online shopping sites, and false benefit notices are also problematic. Especially, investment fraud ads using unauthorized celebrity photos and names have repeatedly become social issues in recent years.

Japanese users also see ads on Facebook, Instagram, YouTube, and X. How these ads are reviewed and what actions are taken after reporting suspicious ads are mostly invisible to general users. Simply stating "ads are posted by third parties" after harm occurs is insufficient for user protection.

Additionally, with AI-generated images and automatic translation, it has become easier for overseas fraud groups to create a large number of Japanese ads. The era when unnatural language could be a giveaway is ending. Moving forward, ad distribution platforms need to more strictly verify "who is posting the ads," "is the link destination safe," and "is the advertiser one with a history of violations."

The Turning Point in Advertising Business Indicated by the Meta Lawsuit

The lawsuit may not immediately change Meta's business model. Meta has shown a stance to contest, and it will take time for a conclusion to be reached. However, the impact of this issue on the entire advertising platform is significant.

Firstly, the transparency of ad review is questioned. Platforms need to explain not only how many ads were removed but also the criteria for reviewing advertisers and how they deal with advertisers who repeatedly violate rules.

Secondly, the balance between revenue and safety is questioned. Even if reducing fraudulent ads lowers revenue, delaying user protection is not permissible. Instead, the cost of eliminating fraudulent ads should be treated as a natural responsibility of operating an advertising business.

Thirdly, the regulation of ads in the AI era is questioned. With generative AI, fraudulent ads can be made to look more authentic, in larger quantities, and faster. Relying solely on traditional report-based measures has its limits. A combination of multiple measures is necessary, including pre-display review, advertiser identity verification, link destination verification, and prompt refund and relief systems after damage reports.

Conclusion: The Issue Doesn't End with "Is Meta to Blame?"

How much legal responsibility Meta will be held to in this lawsuit is left to future judicial decisions. Not all claims made in the lawsuit may be accepted, and Meta has its counterarguments. However, viewing this issue solely as a lawsuit between "Meta and Santa Clara County" is too narrow.

The essence is the reality that the internet, sustained by advertising, has become an extremely efficient customer acquisition tool even for fraudsters. The technology to read user interests and deliver ads to those most likely to respond can be a convenient marketing tool when used correctly. But if misused, it can become a weapon that precisely targets vulnerable individuals.

The harsh reactions on social media are because many people already feel this reality firsthand. They've seen suspicious ads. They weren't removed even after being reported. Family members almost got scammed. Their own accounts were hijacked and misused for ads. These accumulated experiences are eroding trust in the platform.

What is required of Meta is not just a PR statement saying "we are taking fraud measures." It is to make the structure of ad revenue itself transparent and demonstrate a structure that does not make fraudulent ads a source of profit. This lawsuit may be the first step in that direction. At the same time, it serves as an unavoidable warning for all giant platforms sustained by advertising, including Google, YouTube, TikTok, and X.

Source URL

Engadget: Santa Clara County's lawsuit against Meta, Meta's counterarguments, references to related lawsuits and investigations by CCDH and CFA.
https://www.engadget.com/2171464/meta-is-facing-another-lawsuit-over-scam-ads-on-facebook-and-instagram/

Reuters: Details of Santa Clara County's lawsuit against Meta. Claims in the lawsuit, indication of up to $7 billion annual revenue from high-risk fraudulent ads, Meta's comments, etc.
https://www.reuters.com/sustainability/boards-policy-regulation/california-county-sues-meta-over-scam-ads-2026-05-11/

Reuters: Investigative report on suspicions of fraudulent ad revenue based on Meta's internal documents. Background information on the scale of revenue from fraudulent and prohibited product ads.
https://www.reuters.com/investigations/meta-is-earning-fortune-deluge-fraudulent-ads-documents-show-2025-11-06/

Center for Countering Digital Hate: Investigation into Medicare-related fraud ads. Information on ads targeting the elderly, ad display counts, Meta's estimated revenue, etc.
https://counterhate.com/research/scambook/

Consumer Federation of America: Announcement of a class-action lawsuit against Meta by CFA. Criticism of Meta's explanations regarding fraud ad measures under the D.C. Consumer Protection Act, etc.
https://consumerfed.org/press_release/consumer-federation-of-america-sues-meta-for-failing-to-protect-users-from-scam-advertisements/

Consumer Federation of America Complaint PDF: Text of the complaint filed by CFA. Meta's advertising policy, consumer protection claims, damage recovery, and injunction requests, etc.
https://consumerfed.org/wp-content/uploads/2026/04/2026.04.21-CFA-Meta-Complaint-Final.pdf

Reddit r/technology: Example of social media reactions to the Engadget article. Criticism of Meta, opinions that investigations should be expanded to other platforms like Google and YouTube.
https://www.reddit.com/r/technology/comments/1tbh032/meta_is_facing_another_lawsuit_over_scam_ads_on/

Reddit r/facebook: Example of user reactions to Meta's fraudulent ad issue. Experiences of account hijacking, ad manager misuse, and reports of suspicious ads not being addressed.
https://www.reddit.com/r/facebook/comments/1tazgwl/meta_accused_of_earning_billions_from_scam/