Santa Clara County, in California’s Silicon Valley, has sued Facebook parent Meta Platform alleging it knowingly profited from scam advertisements in violation of the state’s laws governing false advertising and unfair business practices.

The lawsuit, filed on Monday in Santa Clara County Superior Court on behalf of all California residents, comes after a Reuters report last year cited leaked internal Meta documents estimating the company earned up to $7 billion (£5.2bn) in annual revenue from “high-risk” scam ads, meaning that they show clear signs of being fraudulent.

Santa Clara County’s lawsuit cites these documents, and alleges that Meta largely tolerated the fraudulent ads, and went so far as to establish “guardrails” to halt scam reduction efforts if they had too much of an impact on the company’s bottom line.

The lawsuit argues Meta materially contributed to large-scale fraud by allowing intermediaries to place ads that were protected against anti-scam action, and by targeting scam ads at people who had clicked on ads of the same kind in the past.

The county also alleged that Meta’s own generative artificial intelligence systems often assist marketers in creating ads for scams.

The county’s counsel, Tony LoPresti, is seeking injunctive relief, civil penalties and restitution for funds lost due to Meta’s actions.

LoPresti said the scams include “fraudulent financial products, cryptocurrency schemes, purported cures for incurable diseases, ineffective nutritional supplements, and impersonations of celebrities asking for monetary contributions”.

Many Meta employees, including chief executive Mark Zuckerberg, live in Santa Clara County, with the company’s headquarters located in adjoining San Mateo County.

Meta said it “aggressively” fights fraud and scams, but the county said such assurances add to the alleged misconduct by giving users the false impression that advertisements are rigorously screened.

“On information and belief, Meta can even adjust the flood of scam ads it allows on its platforms in order to smooth its earnings or hit specific revenue targets,” the county alleges in its lawsuit.

Late last year, Which? accused Meta of allowing scam ads and fake storefronts to “run rampant” on its platforms, with many shops using AI-generated copy and imagery to pose as UK-based, family-run businesses while actually selling low-grade materials direct from China.