rewrite this title and make it good for SEOFormer Meta integrity chief says new report reveals ‘disappointing’ ad fraud epidemic at the social-media giant | Fortune

The report, published Monday, found that Meta generated roughly $18 billion in advertising revenue from China in 2024, around 10% of its global revenue, even as internal documents showed that nearly one-fifth of that (about $3 billion) came from ads tied to scams, illegal gambling, pornography, and other prohibited activity. Meta internally labeled China its top “scam exporting nation,” accounting for 25% of all scam and banned-product ads globally, according to the report.

Meta’s core social media platforms (Facebook, Instagram, WhatsApp) are blocked in China, but the company still earns billions from Chinese advertisers targeting global users.

The investigation, Leathern told Fortune, illuminates several issues with both Meta and the broader Chinese ad market. “It appears that a variety of business partners that Meta has are not conducting themselves in an ethical way and or there are employees of those companies that are not doing what they’re supposed to be doing,” he said. “It’s quite telling that Meta took down its entire partner directory, which obviously means that they must be reviewing their partners, and there’s a lot of them.”

“Scams are spiking across the internet, driven by persistent criminals and sophisticated, organized crime syndicates constantly evolving their schemes to evade detection. We are focused on rooting them out by using advanced technical measures and new tools, disrupting criminal scam networks, working with industry partners and law enforcement, and raising awareness on our platforms about scam activity. And when we determine that bad actors have violated our rules prohibiting fraud and scams, we take action,” a Meta spokesperson told Fortune in a statement.  

Meta communications chief Andy Stone, however, pushed back on the investigation, posting on Threads, “Once again, Reuters is misconstruing and misrepresenting the facts.” He argued that CEO Mark Zuckerberg’s “integrity strategy pivot”—which included instructing the China ads-enforcement team to reportedly “pause” its work—was to improve teams’ goals and “instruct them to redouble efforts to fight frauds and scams globally, not just from specific markets.” 

Stone also claimed that these teams have “doubled their fraud and scam reduction goal and over the last 15 months, user reports of scam ads have declined by well over 50%.”

The revelations published by Reuters echo—but far exceed—the AI-driven deepfake scheme earlier this year involving Goldman Sachs during which scammers used AI-generated videos of investment strategist Abby Joseph Cohen to lure retail investors into fraudulent WhatsApp groups via Instagram ads.

Reuters’ reporting suggests Meta’s China-linked scam problem is not an edge case or a blind spot, but an allegedly known and lucrative segment of its advertising business.

According to internal estimates cited by Reuters, Meta served as many as 15 billion “high-risk” fraudulent ads per day, generating roughly $7 billion annually. The company required a 95% confidence threshold before banning fraudulent advertisers; those falling below it were often allowed to continue operating, sometimes at higher fees. Meta also established a 0.15% revenue “guardrail” (about $135 million) as the maximum revenue it was willing to forgo to crack down on suspicious ads, even as it earned $3.5 billion every six months from ads deemed to carry “higher legal risk.”

Internal decision-making was explicit. When enforcement staff proposed shutting down fraudulent accounts, internal documents reviewed by Reuters showed they sought assurance that growth teams would not object “given the revenue impact.” Asked whether Meta would penalize high-spending Chinese partners running scams, the answer was reportedly “No,” citing “high revenue impact.” Internal assessments reportedly noted that revenue from risky ads would “almost certainly exceed the cost of any regulatory settlement,” effectively treating fines as a cost of doing business.

In late 2024, Meta reinstated 4,000 second-tier Chinese ad agencies that had previously been suspended, unlocking $240 million in annualized revenue—roughly half of it tied to ads violating Meta’s own safety policies, according to the investigation. More than 75% of harmful ad spending, Reuters found, came from accounts benefiting from Meta’s partner protections. The company also disbanded its China-focused anti-scam team.

An external audit commissioned by Meta from the Propellerfish Group reached a blunt conclusion when investigating fraud and scams on the platform: Meta’s “own behavior and policies” were promoting systemic corruption in China’s advertising ecosystem. Reuters reported that the company largely ignored the findings and expanded operations anyway.

Leathern, who reviewed the reporting and internal figures referenced in the report, told Fortune the scale of the problem was difficult to defend. “I was disappointed that the violation rates for the China-specific advertisers were as high as they were in the last year,” he said. “It’s disappointing, because there are ways to make it lower.”

His critique goes to the heart of the failure. Platforms, he said, should hold intermediary agencies accountable for the quality of advertisers they bring in. “If you’re measuring violation rates coming from certain partners, and those rates are above a threshold every quarter or every year, you can just fire your worst-performing customers,” he said.

“I think it’s important for us to have some sense of transparency into how policies are being enforced and what companies are doing in terms of reducing scams on their platforms,” Leathern added.

Over the last 18 months, Meta has removed or rejected more than 46 million advertisements placed via so-called resellers, or large Chinese ad firms. And more than 99% of ad accounts associated with resellers found to be violating the company’s fraud policies were proactively detected and disabled. 

Aside from a need for transparency, Leathern warned that prioritizing short-term revenue over trust ultimately threatens the business itself. “If people don’t trust advertisers, advertising, it reduces the effectiveness of that channel for all advertisers,” he said. “There’s a lot of risk to their business, directly and indirectly, from not doing a good enough job on stopping scams.”

The human cost is already visible. Reuters documented victims across North America and Asia, including U.S. and Canadian investors who lost life savings to fake stock and crypto ads, Taiwanese consumers misled into buying counterfeit health products, and a Canadian Air Force recruiter whose Facebook account was hijacked to run crypto scams. Meta’s own internal safety staff estimated the company’s platforms were “involved” in roughly one-third of all successful U.S. scams, linked to more than $50 billion in consumer losses.

The problem is intensifying as generative AI lowers the barrier for scammers. “You can create something that looks plausible far more easily than ever before,” Leathern said. “The speed and adaptability of criminals and their use of AI tools just makes the environment far more tricky.”

Yet Leathern said platforms like Meta have not been sufficiently transparent about how aggressively they are using those same tools to fight abuse. “We just don’t have a ton of insight into what they’re doing to reduce scams and fraud coming in through ads,” he said.

For Leathern, the investigation should be a turning point. “I hope they see this as an opportunity to improve things for people,” he said.