Estée Lauder’s $210 Million Investor Fraud Settlement Wins Final Approval

A federal judge has approved a $210 million settlement for investors who accused Estée Lauder of overstating its growth prospects while the company faced mounting pressure from a Chinese crackdown on a lucrative cosmetics resale market.

The agreement resolves securities fraud claims against the beauty company and former CEO Fabrizio Freda and former CFO Tracey Travis over forecasts issued during its recovery from the COVID-19 pandemic.

U.S. District Judge Arun Subramanian granted final approval on October 14, 2026, in Manhattan federal court and awarded $63 million in attorneys’ fees plus about $760,000 in litigation expenses. He cut the lawyers’ requested fee from 32% of the settlement to 30%, leaving an additional $4.2 million in the fund available to investors.

At the center of the case was Estée Lauder’s exposure to the daigou trade, an informal resale market in which shoppers buy luxury goods at discounted or duty-free prices and resell them to customers, often in mainland China. Shareholders alleged that sales through those channels became increasingly important to Estée Lauder’s business in Hainan as expanded duty-free allowances helped support revenue during the pandemic.

As Chinese authorities tightened restrictions on daigou sales, Estée Lauder continued issuing growth forecasts. The investors alleged that Freda and Travis attributed weaker results to pandemic disruptions, inventory problems and the slow recovery of Asian travel retail without adequately revealing how the crackdown was affecting an important sales channel.

On November 1, 2023, Estée Lauder cut its financial outlook and acknowledged that government and retailer policies affecting unofficial sales channels had contributed to the decline. Its shares fell nearly 19% that day, closing at $104.51.

The investors’ theory was that the earlier forecasts left the market with an overly optimistic picture of Estée Lauder’s recovery, causing shareholders to buy at prices that did not fully reflect the problems affecting the company’s China-related business.

Subramanian allowed the core securities fraud claims to proceed on March 31, 2025. Three Michigan public pension funds leading the case reached the $210 million settlement with Estée Lauder in April 2026, with the company and its insurers funding the recovery.

At an August 20 hearing, Subramanian pressed the pension funds and their lawyers to explain why investors should pay a 32% fee when a lower percentage had been considered during negotiations. He ultimately found the record did not justify the higher amount and reduced the award to 30%.

Estée Lauder continues to deny wrongdoing. The final judgment resolves the claims with prejudice, preventing the settled claims from being brought again.

The settlement covers eligible investors who acquired Estée Lauder shares between February 3, 2022, and February 3, 2025, and suffered qualifying losses. The deadline to submit a claim was August 5, 2026.