Scandalous: Kylie Cosmetics Is in Some Hot Legal Water

I can barely remember a time before Kylie Jenner was creating makeup, but if you can believe it, Kylie Cosmetics is only just shy of five years old. The youngest of the OG Kardashian/Jenner clan, Kylie created a makeup brand named after herself that specialized in "lip kits" beginning in November 2015. With each kit containing a liquid lipstick and liner, Jenner convinced women everywhere that with her products (and definitely not lip fillers, even though she'd already confessed to getting them by then), they, too, could achieve the full, plump lip look that everyone's so eager for. The lip kit descriptions on her website literally read, "your secret weapon to create the perfect 'Kylie Lip.'" Cue massive eye roll.

From there, Jenner's brand expanded through 2018 to include more makeup items, holiday collections, collaborations with her sisters and brick-and-mortar pop-ups. Around that time, Jenner revealed in interviews that her company had earned $420 million in its first year and a half, and there was no sign of slowing down. In 2018, she gave birth to daughter Stormi, designed a mobile app and signed an exclusive distribution deal with beauty chain Ulta. And in May 2019, she debuted her foray into the skin care (using "care" loosely, here) side of beauty.

Jenner had already made it onto Forbes' list of America’s Richest Self-Made Women, but it was around this time that they took a harder look at the youngest Jenner and published the article naming her the youngest self-made billionaire ever; they valued her company at $900 million and added in her personal profits for the grand total. (Obviously, there was plenty of contention around the term "self-made," given that she'd been on a reality show for a decade by that point, but I digress.)

Suffice it to say, Jenner was pretty comfortable selling her business. In November 2019, Kylie Comestics sold a 51 percent majority stake to Coty Inc., which owns huge names like Alexander McQueen, Balenciaga, Calvin Klein and more. The deal valued the company at around $1.2 billion. Jenner remains with the brand to focus on product development and promotion.

Earlier this year, in May, Forbes ultimately rescinded their previous assertion that Jenner was worth that $900 million and-then-some. And they didn't do so quietly.

In an article titled, "Inside Kylie Jenner's Web of Lies -- and Why She's No Longer a Billionaire," Forbes staff writers Chase Peterson-Withorn and Madeline Berg went all in on Jenner, her company and even her family, calling "one of the greatest celebrity cash-outs of all time" a product of "a less flattering truth."

According to Forbes, that $420 million number that was printed everywhere in the wake of Kylie Cosmetics' boom had first been presented to them -- and was deemed not entirely plausible. Nevertheless, as the Jenners showed up with more and more receipts, Forbes put Jenner on the cover and called her a billionaire. The Coty deal also helped to ease any leftover discomfort or suspicions after the fact. 

The article dove into a lot of financials, but the point made was that after the sale, actual revenues of Kylie Cosmetics were found to be a lot smaller than the buy-out had made them sound...meaning that original, $420 million? Also probably higher than it really was.

"If Kylie Cosmetics did $125 million in sales in 2018, how could it have done $307 million in 2016 (as the company’s supposed tax returns state) or $330 million in 2017?" they wrote.

Forbes hinted at forged tax returns and an issue of trust beneficiaries to be the culprits behind the misleading numbers, all unproven (but, they say, likely); in any case, they asserted that Jenner is worth under $900 million, at most. (However will she go on?!) The purpose of the exposé wasn't the "billionaire" status, but the misleading financials leading up to it.

Jenner discounted the allegations, but not very believably or with any real specifics. An official statement to Forbes by the Jenners reads in part, "The accusations that the Jenners, and/or their accountants, falsified tax returns and then lied about their 2016 revenues for the last four years, are absolutely false."

Earlier this week, it was announced that Coty Inc. was being sued for overpaying for Kylie Cosmetics -- which basically means that the business' revenues were inflated, Coty knew about it (or didn't care to check) and paid for it based on those numbers, anyway.

The class action lawsuit, filed by Coty shareholder Crystal Garrett-Evans in a New York federal court, says that Coty violated U.S. federal securities laws by engaging in "a fraudulent scheme...that operated [to deceive] purchasers of Coty shares by disseminating materially false and/or misleading statements and/or concealing material adverse facts...about Coty’s business, operations and prospects." In other words, people who own Coty's shares didn't get the whole financial story, including assessments and value, when the purchase went down, when Kylie Cosmetics was purchased, which is a big no-no. The lawsuit doesn't guess at whether Coty was unaware or not, but at the very least, they didn't do their due diligence.

That May 2020 Forbes article is a big player in the lawsuit, as it claims that Coty stock prices fell over 13 percent after the piece was published.

Someone's got some 'splaining to do!

What's sad, though, is at the end of the day, this probably won't even make a dent in either Jenner's brand or her reputation. So why doctor the numbers in the first place?