Myths, misinformation, facts like posts spread by social media during COVID-19 pandemic had an enormous effect on psychological health. This study aimed to investigate social media based COVID-19’s posts and the psychological health status of participants. A cross-sectional, online survey-based study was conducted in between April to October 2021 using a structured and semi-structured questionnaire, predominantly involving 1200 active social network users in Bangladesh. Depression, anxiety, and stress were assessed using the Depression, Anxiety, and Stress Scale (DASS-21), while the Insomnia Severity Index (ISI) measured insomnia severity for selected participants. Internal reliabilities were calculated with Cronbach’s alpha coefficients (cut-off point 0.70). Unrelated multivariate logistic regression explored correlations among outcome errors, with the model assessing the impact of selected independent variables on mental health. The findings demonstrated that 27.8% individuals spread facts whereas 7.4% spread myths and misinformation about COVID-19 on social networks. Furthermore, 28.1% and 36.7% shared obstinate and concerning posts respectively. The prevalence of depression, anxiety and stress symptoms, ranging from mild to extremely severe, were 43.9%, 30.9%, and 23.8% respectively. However, 2.8% had severe level of insomnia. Facts, myths, tour attending, and no mask group photos were significantly associated with anxiety, and less likelihood of experiencing anxiety. Interestingly, circulating such activities on social networks had no significant association with depression, stress, or insomnia. The spread of misinformation on social media undermines any efforts to contain COVID-19 infection. The findings hugely recommend of using fact checking facilities and adaptation to the pandemic situations to maintain lower prevalence of depression, anxiety, stress and insomnia.