Bouck v. Meta Platforms, Inc., No. 25-cv-05194-RS (N.D. Cal.
Mar. 24, 2026) 

Does offering AI enhancements to deceptive ads constitute
participating in what makes them illegal for purposes of avoiding section 230?
This case answers “yes, relatively easily” and it should be raising flags in a lot of
boardrooms.

Plaintiffs here are victims of a pump-and-dump scheme
involving shares of a Chinese penny stock. The scammers initially targeted them
on Facebook and Instagram through advertisements for investment groups
promising handsome returns. For example, in one ad, Kevin O’Leary— “a
businessman well-known for his role on Shark Tank”—appears to advertise a
private group in which stock tips are shared. In another, Savita
Subramanian—Bank of America’s head of U.S. equity and quantitative strategy—
“looks to be promoting” spots in a “free trading training” group that boasts
“95% accuracy” and 30-40% daily returns. 

Plaintiffs sued Meta for aiding and abetting fraud;
negligence; breach of contract; violation of the California Unruh Civil Rights
Act, Cal Civ Code § 51; and unjust enrichment, along with promissory estoppel
and breach of the covenant of good faith and fair dealing as alternatives to
their breach of contract claim. The court allowed the claims for aiding and
abetting fraud, negligence, and unjust enrichment to proceed.

Section 230: An “information content provider” is “any
person or entity that is responsible, in whole or in part, for the creation or
development of information provided through . . . any other interactive
computer service.” If Meta was sufficiently involved in the “creation or
development” of the fraudulent ads, the court reasons, then those ads were not
just “provided by” the scammers—they were also provided by Meta. Under 9th
Circuit precedent, a website helps to develop unlawful content “if it contributes
materially to the alleged illegality of the conduct.”

Plaintiffs’ allegations of material contribution depended on
three tools Meta offers to advertisers. (1) Flexible Format: “Meta
automatically optimizes the ad and shows it in the format that Meta predicts
may perform best” by “selecting the specific images and other content that will
be included, the layout, the platform (Facebook or Instagram), and how the ad
will be displayed to a particular user (e.g., in the user’s feed, as a story,
etc.).” (2) Dynamic Creative: This tool “takes multiple media, such as images
and videos, and multiple ad components, such as images, videos, text, audio,
and calls-to-action, and then mixes and matches them in new ways to improve . .
. ad performance.” This “allows the advertiser to automatically create
personalized creative variations for each person who views the ad, with results
that are scalable.” (3) Advantage+ Creative: Meta uses generative AI to apply
“creative enhancements” to optimize advertisements, including AI-generated text
and images. “The alterations may include modifications to images (such as
applying different text overlays or modifying the image background), generating
variations of the ad’s text to target different audiences, and inserting ‘Call
to Action’ buttons, such as a link to purchase a product or join a WhatsApp
group.”

The complaint alleged that scammers used these tools at
least to create different variations of ads featuring Ms. Subramanian. That was
enough to plead the existence of a dispute over whether Meta “contribute[d]
materially to the alleged illegality of the advertisements.” “Plaintiffs have
averred that Meta participated in the construction of the ads by literally
generating, using artificial intelligence, the images and text in the
advertisements. That degree of participation is not protected by section 230.”
In other words, “optimizing the appearance of an ad to drive engagement” was
enough of a contribution to the ads’ illegality to preclude section 230
immunity. Pleading the ability to create “AI- generated text and images” “is
more than enough to aver ‘that the tools affect ad content in a manner that
could at least potentially contribute to their illegality.’”

Meta argued that its tools were “neutral” and that offending
content was exclusively provided by the scammers. But 230 allows services to
“structure the information provided by users,” not “to create the information
itself.” Plaintiffs alleged that “Meta created the offending information by
generating some of the false statements that tricked them into the investment
scheme.”

If a scammer tells Advantage+ Creative “that he is
interested in an ad promising astronomical weekly investment returns,
Advantage+ Creative will spin up a slew of ads that include the provided
language and other language, images, and videos it decides will be effective in
promoting the user’s chosen message.” Indeed, a journalist from Reuters asked
for an ad asking users if they were “interested in making 10% weekly returns.”
Advantage+ Creative “generated a slew of ads saying just that and new ads with
language like ‘Tired of living paycheck to paycheck? Break the cycle and start
earning steady weekly income with our proven system.’ The reporter did not come
up with that (patently fraudulent) language; it was all Meta.” It was at least
plausible that some of the illegal content (i.e., the fraudulent statements in
the ads) was created by Meta, not by the scammers.

Aiding and abetting fraud: “California has adopted the
common law rule that [l]iability may … be imposed on one who aids and abets
the commission of an intentional tort if the person … knows the other’s
conduct constitutes a breach of a duty and gives substantial assistance or
encouragement to the other to so act.” Meta argued that it neither had
knowledge of the scammers’ conduct nor substantially assisted in the execution
of their scheme. Plaintiffs alleged that Meta has been repeatedly subject to
lawsuits stemming from similar schemes; that Meta itself acknowledged the
proliferation of fraud using public figures and celebrities’ images; and that
Meta had an “ad review system” in place to screen ads for “violation of
[Meta’s] policies.”

Meta responded that knowledge that fraud is occurring
generally on its platforms could not have given “actual knowledge of the
specific primary wrong” at issue in this case. “In a vacuum, that argument has
merit. Under California law, knowledge that something illegal is occurring on a
defendant’s platform does not establish that the defendant knew of the
particular illegal conduct that injured the plaintiff.” But the court accepted
allegations “that when Meta saw the ads in its ad review process, Meta acquired
actual knowledge of their fraudulence.”

What about the moderator’s dilemma?  “To be sure, in many cases a defendant could
not be charged with actual knowledge of fraud simply because the fraud passed
through a routine review process. For that reason, many cases arising in the
financial fraud context have required a plaintiff bringing an aiding and
abetting claim to show that the defendant had some extra knowledge about the
primary fraudster in order to create an inference that the defendant knew of
the fraud and passed it through the review process anyways.” But here, “no
extra knowledge is required. That is because the advertisements are facially
ridiculous.” [This seems like it will create a bit of a problem on the back end
of proving classic fraud—where is the reasonable reliance?]

Thus, an ad showing “Savita Subramanian, one of Wall
Street’s most respected market observers, purporting to offer stock tips in a
WhatsApp group,” not through her employer Bank of America but promoting
something called “AI Investment.” “She” touted daily potential returns that
were roughly three to four times the average annual return of U.S. equity
markets, all for free. “Even a cursory look would warrant suspicion that the ad
is fraudulent….  If Plaintiffs succeed in
convincing a jury that this ad (and others that are equally preposterous)
passed Meta’s ad review process, the jury would be entitled to infer that Meta
had actual knowledge of the fraud at the time the ads went out to its users.”

Meta made the obvious point that its ad review is not human
review, and that automated systems don’t have the intuitive knowledge that
allows this conclusion from a “cursory look.” The court found that response
“confounding.” “It was Meta’s decision to use technological review tools to
screen ads, and it does not now get to claim it had no idea what was going on
because it tasked some software program with doing the first pass.” But … Meta
did have no idea what was going on, in the sense of having specific knowledge.
This really is a decision to allow general knowledge to count for liability; it
penalizes Meta for having automated review instead of no review. Given that
human review at Meta scale is … let’s say unlikely … then allowing this
generalized knowledge to count is another blow against large online services
generally.

The court also found that it was plausible that Meta
acquired knowledge that it was aiding and abetting a fraud “well before the ad
passed through a review system.” “At the moment a scammer asked Advantage+
Creative to generate an ad using a celebrity, a secret chat room, and the
promise of unfathomable riches, there is at least a fact question on whether
Meta acquired knowledge that it was aiding and abetting a fraud.” After all,
“even routine operations may constitute substantial participation if done with
knowledge.”

Breach of contract: Meta didn’t impose a binding contractual
obligation on itself to do anything, only a duty on its users not to pollute
Meta’s platforms with scam investment ads. For similar reasons, alternative
claims for promissory estoppel and for breach of the covenant of good faith and
fair dealing failed.

But negligence survived for the reasons above.

California’s Unruh Act provides that all individuals,
regardless of race or national origin, shall be “entitled to the full and equal
accommodations, advantages, facilities, privileges, or services in all business
establishments of every kind whatsoever.” Plaintiffs alleged that Meta’s
advertising tools targeted ads featuring celebrities and investors that shared
their race or national origin to make it more likely that they’d engage with
the ad and succumb to the scam. “In general, a person suffers discrimination
under the [Unruh] Act when the person presents himself or herself to a business
with an intent to use its services but encounters an exclusionary policy or
practice that prevents him or her from using those services.” Targeting is not
exclusion, so there was no violation.

Unjust enrichment also survived.

from Blogger https://tushnet.blogspot.com/2026/04/metas-ai-assistance-to-advertisers.html