$102M Stock Dump Sparks Lawsuit Against Stitch Fix Leaders

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$102M Stock Dump Sparks Lawsuit Against Stitch Fix Leaders

San Francisco, CA — A shareholder derivative lawsuit has been filed against Stitch Fix executives, alleging they sold over $102 million in company stock while concealing internal knowledge of business struggles tied to the company’s controversial shift in strategy.

Filed in the U.S. District Court for the Northern District of California, the lawsuit claims that top Stitch Fix execs, including founder and CEO Katrina Lake, former CEO Elizabeth Spaulding, and several current and former board members, engaged in improper stock sales while aware of the negative financial impact stemming from the company’s 2020 launch of its “Freestyle” shopping program.

The complaint, led by shareholder Melonie Schultz, argues that the Freestyle initiative cannibalized Stitch Fix’s original subscription-based “Fix” model and misled investors about its effects. While the company publicly maintained that Freestyle would boost engagement and growth, the suit claims insiders privately recognized its failure and simultaneously sold large volumes of shares.

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According to the complaint, Lake alone sold approximately $70 million in stock during 2021, while other insiders—including Spaulding and Director Mike Smith—collectively contributed to sales totaling over $102 million during the alleged period. The plaintiff argues these sales were made while executives were in possession of material nonpublic information, violating their fiduciary duties.

The lawsuit further highlights that once the company publicly acknowledged problems between the Fix and Freestyle programs in March 2022, Stitch Fix’s stock price plummeted—marking a nearly 90% drop from its December 2020 high by mid-2022.

Schultz seeks damages, restitution, and governance reforms. A separate proposed class action regarding similar allegations has also been allowed to move forward by a federal judge earlier this month.