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Meta Platforms is facing a class-action lawsuit from three users who allege the company’s AI-generated advertisements on Facebook and Instagram funneled them into WhatsApp groups where scammers persuaded them to send money and cryptocurrency, according to a complaint filed in federal court in San Francisco.
The lawsuit places particular emphasis on Meta’s advertising systems and generative artificial intelligence tools, arguing that the company played more than a passive role in distributing the allegedly fraudulent promotions.
The case comes as Meta continues to face scrutiny over the use of its platforms to promote crypto scams, including previous litigation involving advertisements that allegedly directed users toward WhatsApp-based cryptocurrency schemes.
According to the complaint, the plaintiffs encountered advertisements on Facebook or Instagram that ultimately directed them into WhatsApp groups. Once there, the plaintiffs allege, scammers instructed them to send money or cryptocurrency to specified wallets.
The lawsuit alleges that the victims believed they were participating in legitimate investment opportunities. The alleged fraud became apparent when they attempted to withdraw their funds.
“When the plaintiffs tried make withdrawals, ‘the scammers would not allow them to do so, revealing that the displayed balances were illusory and the deposited funds were gone,’” the complaint alleges.
The plaintiffs argue that Meta’s role went beyond simply providing advertising space. They claim the company actively participates in the creation, placement and targeting of advertisements and therefore should bear responsibility for the way allegedly fraudulent promotions reach users.
“Defendants actively participate in, assist, and encourage the creation, placement, and targeting of scam ads,” Niroshini Dassanayake, Kenneth Gugel and Andrew Svoboda, in their class-action complaint.
The lawsuit alleges that Meta’s systems can help fraudulent campaigns reach consumers who may be particularly susceptible to investment pitches and other deceptive claims.
A central part of the new lawsuit concerns Meta’s generative AI technology. The plaintiffs allege that the company’s AI tools can make fraudulent advertising campaigns more efficient by rapidly producing variations of promotional material.
According to the complaint, Meta’s AI capabilities “have enhanced the effectiveness of fraudulent advertisements by generating hundreds of variations which are optimized to drive engagement by vulnerable users.”
The plaintiffs further contend that Meta knew, or should have known, that its AI systems could contribute to the creation and optimization of misleading advertisements.
They also allege that Meta’s recommendation and advertising algorithms can steer deceptive promotions toward vulnerable consumers.
The allegations place AI at the center of a growing debate over responsibility for automated advertising systems. The lawsuit does not simply accuse third-party scammers of wrongdoing; it argues that Meta’s technology and advertising infrastructure contributed to the reach and effectiveness of the promotions.
The plaintiffs also challenge what they describe as Meta’s representations about its ability to remove fraudulent content. They allege that the company’s business practices “deceptively lead reasonable consumers” to believe that fraudulent advertisements are removed from its platforms.
The latest case is not the first time Meta has faced litigation over crypto scams allegedly promoted through its advertising ecosystem.
The company was sued last year by individuals who said they lost money after encountering Facebook advertisements that directed them into WhatsApp groups associated with an alleged cryptocurrency pump-and-dump operation.
The earlier lawsuit also raised allegations concerning Meta’s use of AI tools to generate advertising material.
Meta argued in that case that Section 230 of the Communications Decency Act protected the company from liability for unlawful conduct carried out by advertisers and other third parties. Section 230 generally provides online platforms with immunity from liability for content created by third parties, subject to important legal limitations.
However, a district court judge initially rejected Meta’s request for an expedited dismissal. The judge determined that, assuming the allegations were true, Meta’s alleged involvement in creating the advertisements could be substantial enough to raise questions about whether Section 230 protected the company.
That development was significant because it suggested that the role played by an online platform in producing or enhancing allegedly deceptive advertising could affect the application of Section 230 protections.
The case ultimately did not proceed on those claims. The judge later dismissed the lawsuit on the grounds that the plaintiffs’ claims were pre-empted by federal securities laws.
The previous litigation nevertheless provides important context for the new case, particularly because both disputes involve allegations that Meta’s technology helped scammers develop or distribute cryptocurrency-related advertising.
The latest complaint puts Meta’s advertising infrastructure, AI tools and algorithmic targeting practices under renewed legal scrutiny.
The complaint seeks to establish that distinction through allegations concerning Meta’s advertising technology and the way users were allegedly directed from Facebook and Instagram into WhatsApp groups.
The allegations remain claims made by the plaintiffs, and the filing does not establish that Meta is legally responsible for the losses described. The case will have to proceed through the federal court system, where the allegations and Meta’s potential defenses can be tested.
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