Is LuLaRoe A Scam? Every Major Accusation Fact-Checked
Quick verdict
LuLaRoe is not a scam in the simplest legal sense – it sells real clothing and has not been shut down. But four of the five major accusations against it are substantially true: its pre-2017 bonus structure was found by a state attorney general to constitute a pyramid scheme; it promised a 100% inventory buyback and then silently reversed that promise overnight; its leggings ripped like “wet toilet paper” and it refused refunds; and a California jury found its founders committed fraud using 30-plus shell companies to hide assets. The income data confirms most retailers earn very little.
Key takeaways
- LuLaRoe is not a scam under regulatory definitions – it sells real clothing and has never been shut down by the FTC or any federal authority.
- Washington State AG Bob Ferguson found LuLaRoe’s pre-2017 bonus structure constituted a pyramid scheme under state law; the company settled for $4.75 million in 2021 without admitting liability.
- LuLaRoe offered a 100% inventory buyback in April 2017, used it to recruit consultants into buying more stock, then silently reversed it to 90% overnight on September 13, 2017 – triggering multiple class action lawsuits.
- Leggings described in court filings as ripping like “wet toilet paper” triggered multiple product defect class actions; LuLaRoe initially refused all refunds, then introduced a limited policy after public pressure.
- In November 2024, a California jury found LuLaRoe founders committed fraud using 30-plus shell companies to conceal assets from creditors – awarding $164 million to a former supplier.
Why do people call LuLaRoe a scam?
“Is LuLaRoe a scam” has been one of the most persistent search queries attached to the brand since at least 2017 – and the people asking have specific documented reasons. Former retailers who lost tens of thousands of dollars on inventory they could not sell. Customers whose leggings fell apart before they could even get them on.
Consultants who were told they could return all their stock for a full refund and then found that promise reversed overnight with no warning. And, most recently, a jury that found the founders had used over 30 shell companies to hide assets from the people they owed money to.
These are not vague impressions. They are documented in court filings, state attorney general actions, and a $164 million jury verdict. Working through each accusation separately – against the specific evidence that either supports or challenges it – gives a cleaner answer than any blanket label.
Accusation 1: “LuLaRoe is a pyramid scheme”
This accusation is more precisely true than most people realize – and more precisely limited than critics sometimes claim. The answer depends on which version of LuLaRoe you are describing, and which legal standard you are applying.
In January 2019, Washington State Attorney General Bob Ferguson filed suit alleging that LuLaRoe’s pre-July 2017 bonus structure constituted a pyramid scheme under the Washington Antipyramid Promotional Scheme Act.
The state’s specific finding was that until July 2017, LuLaRoe’s leadership bonus plan gave consultants a “right to receive compensation entirely based on the recruitment of other persons as participants” – the defining feature of an illegal pyramid scheme under Washington law.
Even a LuLaRoe executive acknowledged this in internal communications, explaining that the 2017 compensation plan change came about because of the “need to get away from being a pyramid scheme.”
The class action filed in October 2017 by California residents Berry, Scheffer, and Hayton went further, alleging violations of the federal Racketeer Influenced and Corrupt Organizations Act – a law typically used against organized crime – and California state law. That case alleged consultants were duped into becoming distributors with false claims of “full-time pay for part-time work.”
LuLaRoe recruited consultants with specific earnings representations: executives claimed consultants could make “$60,000 to $75,000 a year working 20 hours a week” and described “a bunch of people” selling up to $150,000 per month. The company’s own 2024 income disclosure shows the median retailer earning $1,045.55 for the entire year.
Accusation 2: “LuLaRoe reversed the 100% buyback promise to trap consultants”
This accusation is true in its essentials – and it is documented with specific dates, dollar amounts, and named plaintiffs whose situations are preserved in court filings.
In April 2017, LuLaRoe introduced its 100% inventory buyback policy in response to a wave of consultants trying to exit the business. The policy was explicit: consultants could cancel their agreements and receive 100% of the wholesale price they had paid for unsold inventory, with free shipping on returns.
LuLaRoe and its recruiters actively used this policy to persuade hesitant consultants to buy more stock and to recruit new participants – the reduced financial risk of a full refund option was a core part of the sales pitch.
Then, overnight on September 13, 2017, LuLaRoe sent an email announcing the policy had changed. Instead of 100% with free shipping, returning consultants would now receive at most 90% – only on products purchased directly from LuLaRoe (not from other consultants), only on items LuLaRoe itself deemed resalable, with shipping costs paid by the returning consultant.
LuLaRoe retained any products it deemed non-resalable, meaning it could hold the product without refunding it. One named plaintiff, Stella Lemberg, had $20,000 in inventory she had been unable to return. Another, Amandra Bluder, reported $14,000. Jeni Laurence had $12,000. Carissa Stuckart had $7,000. All had made purchasing decisions specifically in reliance on the 100% buyback policy that had just been removed without warning.
What LuLaRoe said vs. what happened:
✕ “Cancel your LuLaRoe business and receive 100% of the price you purchased your inventory at – with no restocking fee.” (LuLaRoe Cancellation of Business Policy, August 2017)
✓ On September 13, 2017, LuLaRoe reversed this to a 90% refund with multiple restrictions, retailer-paid shipping, and LuLaRoe holding final determination over which products were refundable. Consultants who had purchased additional stock relying on the 100% policy were left with losses they had been explicitly told they could not incur.
Accusation 3: “The leggings were defective and LuLaRoe refused to fix it”
This accusation is substantially true – documented in multiple class action filings, internal company communications, and LuLaRoe’s own eventual policy response.
Starting in 2016 and escalating sharply in early 2017, thousands of LuLaRoe customers reported the same problem: leggings developing holes, rips, and tears before, during, or shortly after their first use.
The language that stuck – “rip like wet toilet paper” – came from a class action complaint filed in March 2017 by two customers who had also started a private Facebook group with over 26,000 members sharing similar experiences. A second class action followed in April 2017, and more consolidated cases followed after that.
What made the product complaint a genuine scandal was the internal response. LuLaRoe head of production Patrick Winget addressed the defects in a company-wide email, stating that the leggings might develop holes “because we weaken the fibers to make them buttery soft. We have done all we can to fix them.”
That is an internal acknowledgment that the company knew the softening process was causing structural weakness – and that it had been unable to solve the problem. Meanwhile, CEO Mark Stidham reportedly advised consultants to resell damaged merchandise rather than return it.
Customers were directed to their consultant for refunds; consultants were told returns were not permitted; and the consultants were left holding defective products they could not sell and could not return.
Accusation 4: “The founders committed fraud”
This accusation is not a characterization – it is the finding of a California jury in November 2024, and it is the most significant legal development in LuLaRoe history.
The case was brought by Providence Industries LLC – also known as MyDyer – LuLaRoe’s former primary clothing supplier. Providence had entered a sourcing agreement with LuLaRoe in April 2016. The relationship soured in mid-2017 when LuLaRoe began altering its retailer bonus structure, triggering a dramatic revenue collapse: monthly revenues dropped from approximately $200 million to $100 million in a short period.
LuLaRoe continued ordering inventory from Providence while concealing these financial difficulties – then stopped paying invoices entirely, telling Providence founder what amounted to “we are not going to pay you unless a judge orders us to.” Providence, unable to sustain operations without payment, was eventually forced out of business.
What the jury found in November 2024 went beyond contract breach.
The evidence showed that LuLaRoe founders Mark and DeAnne Stidham had used over 30 shell companies to siphon funds away from the business and into personal assets: a stake in the Swedish supercar manufacturer Koenigsegg (including a $700,000 Koenigsegg CCX and a $2 million-plus Koenigsegg Agera RS, held through a shell company called Ghost Squadron LLC), a Gulfstream G550 private jet (held through a shell company called 159DE), and ranch properties in Wyoming and South Carolina (held through real estate shells including Hudsloan Land Co.
LLC and Crown 12 Ranch LLC). The jury found this constituted fraud – specifically fraudulent inducement and an attempt to conceal assets from creditors – and awarded $164 million: $96.3 million for fraudulent inducement and $33.6 million for breach of contract. This was not an allegation. It was a jury verdict.
Accusation 5: “The income claims were outright lies”
The income claims made during LuLaRoe recruiting events were not nuanced exaggerations. They were specific numbers attached to specific people – and the gap between those numbers and the disclosed reality is one of the largest documented in any MLM of comparable scale.
Washington State’s lawsuit documented specific income representations made to prospective consultants: executives claimed retailers could make “$60,000 to $75,000 a year working 20 hours a week.” At recruitment events, executives said “so many of our retailers are making amazing money doing this part time” and described “a huge number of people” selling $15,000 to $20,000 per month.
One executive claimed the company had “a bunch of people” selling up to $150,000 per month. The settlement specifically required that LuLaRoe publish an income disclosure statement and stop making claims implying that the income of top earners was representative of typical retailer earnings.
The 2024 income disclosure LuLaRoe subsequently published puts those numbers in context. The median gross profit for all retailers in 2024 was $1,045.55 for the entire year – before subtracting the cost of inventory purchases, any business operating expenses, or the startup kit.
The average was $11,914.53, but this figure is pulled upward by a small number of high-volume sellers; the median tells the real story for the typical retailer. Ninety percent of all retailers participated in no Leadership Compensation Plan bonus income at all. In 2016, at the company’s peak, 73.63% of consultants received zero monthly bonus payments.
So is LuLaRoe a scam? The verdict accusation by accusation
“LuLaRoe is a pyramid scheme” – Substantially true for the pre-2017 structure
Washington State AG found the pre-July 2017 bonus structure met the state definition of a pyramid scheme. LuLaRoe’s own internal communications acknowledged the plan needed to change to “get away from being a pyramid scheme.” The company settled for $4.75 million in 2021. No federal pyramid scheme finding exists, and the FTC has not shut the company down. The post-2017 structure is legally different. But the accusation accurately describes how the company operated during its peak growth years.
“LuLaRoe reversed the buyback promise to trap consultants” – True – documented in court filings with specific dates and amounts
LuLaRoe offered a 100% inventory buyback from April 2017, used it to recruit consultants into buying more stock, and reversed it overnight on September 13, 2017, to a 90% policy with multiple restrictions. Consultants who had purchased inventory specifically relying on the 100% promise were left with no practical recourse. Multiple class actions documented named plaintiffs with $7,000 to $30,000 in stranded inventory. This is one of the most clearly documented bait-and-switch actions in the MLM complaint record.
“The leggings were defective and LuLaRoe blocked refunds” – Substantially true – internally acknowledged and refund-blocked
LuLaRoe’s own head of production acknowledged in a company-wide email that fiber-weakening caused the holes. The CEO reportedly advised consultants to resell defective merchandise rather than return it. Customers were directed to consultants for refunds; consultants were told returns were not LuLaRoe’s responsibility. Multiple class actions consolidated into Tanya Mack v. LLR, Inc. LuLaRoe eventually introduced a limited “Happiness Policy” after public pressure – but only after blocking refunds through a deliberately difficult structure.
“The founders committed fraud” – True – jury finding, November 2024
A Riverside County Superior Court jury found in November 2024 that LuLaRoe and its founders used 30-plus shell companies to siphon funds from the business into personal assets – Koenigsegg supercars, a Gulfstream jet, ranch properties – while failing to pay a supplier they eventually drove out of business. The jury awarded $164 million: $96.3 million for fraudulent inducement and $33.6 million for breach of contract. This is not an allegation – it is a jury verdict on a fully tried case.
“The income claims were lies” – Substantially true – specific claims documented and contradicted by disclosure data
Executives made specific income claims at recruitment events – “$60,000 to $75,000 a year for 20 hours a week,” retailers selling “$150,000 per month” – that the Washington State settlement found to be deceptive. The settlement required publication of an income disclosure. That disclosure now shows a median annual gross profit of $1,045.55 for 2024 – before expenses – with 90% of retailers earning no bonus income at all. The claims made during peak recruiting bore no relationship to the income the vast majority of consultants experienced.
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Is LuLaRoe worth joining in 2026 – honest verdict
The record is unusually complete for a company that is still in operation. LuLaRoe is not a scam in the simplest sense – it is not a fictional entity designed to take money and disappear.
But four of the five major accusations against it are substantially documented: the pre-2017 bonus structure met a state definition of a pyramid scheme; the buyback reversal is preserved in court filings with named plaintiffs and specific dollar amounts; the leggings defect was acknowledged internally; and the fraud finding from November 2024 is a jury verdict, not an allegation.
In 2026, LuLaRoe is a much smaller company carrying all of that history. The startup cost has been reduced from the former $5,000 to $10,000 peak. The company now publishes an income disclosure. The compensation structure is different from its pre-2017 form.
But the median disclosed profit for 2024 is still $1,045.55 for the entire year before expenses, the $164 million fraud verdict is still in post-trial proceedings, and the founders who created the buyback reversal and the shell company structure are still running the company.
Not technically a scam – but four of five major accusations are substantially documented
LuLaRoe sells real clothing and has not been federally shut down. But its pre-2017 bonus structure was found by a state attorney general to meet the legal definition of a pyramid scheme; it reversed a 100% buyback promise overnight leaving consultants with thousands in stranded inventory; it sold defective leggings and blocked refunds until forced by litigation; and a California jury found its founders committed fraud in 2024. The income data shows a median annual profit of $1,045.55. On the full evidence available, calling LuLaRoe a scam is an understandable response to a documented record – even if it is not a precise legal description.
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Is LuLaRoe a scam?
Was LuLaRoe ever found to be an illegal pyramid scheme?
Yes – with important precision. Washington State Attorney General Bob Ferguson found that LuLaRoe pre-July 2017 bonus structure met the Washington Antipyramid Promotional Scheme Act definition of a pyramid scheme: it compensated consultants based primarily on recruitment of new participants rather than retail product sales. LuLaRoe changed its compensation plan in July 2017 – a move the company internally acknowledged was made to "get away from being a pyramid scheme." LuLaRoe settled the state lawsuit in February 2021 for 4.75 million dollars without admitting liability. The FTC has not made a federal pyramid scheme finding against the company, and the post-2017 structure is legally distinct from the earlier one.
What happened with the LuLaRoe 100% buyback reversal?
In April 2017, LuLaRoe introduced a 100% inventory buyback policy, promising consultants they could cancel their agreements and receive a full refund of their wholesale inventory cost with free shipping on returns. LuLaRoe and its recruiters used this policy as a sales tool, encouraging consultants to purchase additional inventory and recruit new participants on the basis of the reduced financial risk. On September 13, 2017, LuLaRoe sent an email reversing the policy without prior warning. The new terms offered at most 90% – only on products purchased directly from LuLaRoe, only on items LuLaRoe itself deemed resalable, with shipping paid by the returning consultant. Named plaintiffs in subsequent class actions reported between 7,000 and 30,000 dollars in stranded inventory they had purchased in reliance on the 100% policy that no longer existed.
What was the 164 million dollar LuLaRoe fraud verdict about?
In November 2024, a Riverside County Superior Court jury awarded 164 million dollars to Providence Industries LLC, also known as MyDyer, LuLaRoe former primary clothing supplier. The jury found that LuLaRoe had ordered tens of millions of dollars in inventory while concealing financial difficulties, then refused to pay invoices, eventually forcing Providence out of business. The jury also found that LuLaRoe founders Mark and DeAnne Stidham used more than 30 shell companies to siphon funds into personal assets – including Koenigsegg supercars, a Gulfstream private jet, and ranch properties – while failing to pay creditors. The verdict included 96.3 million dollars for fraudulent inducement and 33.6 million dollars for breach of contract. LuLaRoe stated post-trial motions might affect the final amount.
What are better alternatives to LuLaRoe for earning money online?
If your goal is to sell products online and earn income without the risks documented in LuLaRoe history – upfront inventory purchase, randomized stock, refund policies that can change, income claims that do not reflect typical results – ecommerce and dropshipping offer a structurally different model. With a dropshipping store, you never purchase inventory before a customer places an order. There is no buyback policy to trust, no stranded stock, and no income dependent on recruiting. AliDropship provides a fully built store pre-loaded with products you select, plus a full Amazon Seller Kit, with no upfront inventory purchase required. For a broader comparison of online income models, see: https://www.trust-earning-profit.com/how-to-make-money-online/
