The Beauty Health Company, parent of the HydraFacial skincare brand, is the defendant in a federal securities fraud class action alleging that its CEO and CFO concealed serious design defects in the Syndeo facial device while publicly calling its launch a success. The Beauty Health securities fraud lawsuit was filed in November 2023 in the U.S. District Court for the Central District of California, survived a motion to dismiss in September 2025, and has reportedly reached an $18 million settlement.
What Investors Say the Company Hid
The Second Amended Complaint centers on Syndeo, the next-generation machine Beauty Health launched in March 2022. According to the complaint, the devices began failing almost immediately.
A channel in the machine’s manifold was designed too thin and partially blocked by a membrane, causing widespread clogging. By late June 2022, between 20% and 50% of Syndeo machines in the field were affected. Roughly 30% of early units also had cosmetic blemishes and fitment problems the complaint attributes to a China-based supplier decision by then-CFO Liyuan Woo, described internally as a “cost play.” Customers reported blank screens, connectivity failures, pieces falling off, and unauthorized computer chips installed by a subcontractor.
The attempted fix made things worse. A redesigned “Syndeo 2.0” with a wider manifold channel burned through serum at about three times the expected rate, producing five or six treatments per bottle instead of fifteen. By May 2023, the company had received more than 5,000 returned units out of roughly 10,000 Syndeo machines sold. Former employees cited in the complaint say the company’s preferred response was to ship replacements without inspection, and some customers received several defective replacements in a row.
The fraud allegation is that CEO Andrew Stanleick and CFO Woo knew all of this. The complaint says they tracked the failures through internal “Tiger Team” meetings and weekly “Syndeo issues” emails, while Stanleick publicly described the rollout as “flawless” and “highly successful” on earnings calls and at investor conferences, and the company raised its full-year sales guidance. In one episode, when the auditing firm BSI arrived for an ISO certification visit in late 2022, the company allegedly rented an adjacent building to hide 2,000 to 3,000 returned Syndeo machines from view.
The Disclosures That Moved the Stock
The complaint traces the truth emerging in stages:
- February 27, 2023: the company disclosed $2.4 million in “non-recurring Syndeo initial program logistics and services costs.”
- August 9, 2023: Q2 earnings showed a sharp gross margin decline blamed on “lower margin refurbished systems,” a $5 million expense for a “voluntary initiative” to replace certain Syndeo components, and Stanleick calling the problems “teething issues.” The same day, CFO Woo was let go in what the company called an “involuntary separation without cause.”
- November 13, 2023: the company reported lower-than-expected U.S. revenue, $63.1 million in restructuring charges tied to Syndeo upgrades, cut full-year sales guidance to $385–$400 million, suspended its 2025 outlook, and declared all Syndeo 1.0 and 2.0 systems obsolete. Stanleick’s departure was announced effective November 19, 2023.
The stock fell 64.3% after the November 2023 disclosures, closing at $1.39 per share.
The Case in Court
The lawsuit is captioned Alghazwi v. The Beauty Health Company, et al., Case No. 2:23-cv-09733-SPG-MAA, filed November 16, 2023 before Judge Sherilyn Peace Garnett. It brings claims under Sections 10(b) and 20(a) of the Securities Exchange Act on behalf of investors who bought Beauty Health stock between May 10, 2022 and November 13, 2023. The named defendants are the company, Stanleick, and Woo.
On May 2, 2024, the court appointed Priscilla Dijkgraaf and Martijn Dijkgraaf as lead plaintiffs and approved Hagens Berman Sobol Shapiro LLP as lead counsel, with partners Steve W. Berman and Reed R. Kathrein on the team.
Defendants moved to dismiss the Second Amended Complaint in July 2025. On September 23, 2025, the court denied the motion in full, finding the allegations sufficient to proceed. The complaint leans heavily on accounts from six former employees and a customer who ran a 900-member Facebook group of Syndeo users reporting problems.
Law360 has reported that the parties subsequently reached an $18 million settlement. Court approval details are not confirmed in the available record.
Other Proceedings You May See Referenced
The securities case is one of several matters arising from Syndeo, and readers sometimes confuse them.
A consolidated stockholder derivative action, Elstein v. Saunders et al. (C.A. No. 2024-0114-LWW), was filed in the Delaware Court of Chancery against company directors. The parties reached a non-monetary settlement on February 9, 2026, providing for corporate governance reforms including a Quality Ombudsman role, enhanced inventory monitoring, financial projection oversight, and an amended executive compensation clawback policy.
A consumer class action, Davalos et al. v. Hydrafacial LLC et al., was filed in October 2024 on behalf of aesthetics providers who bought Syndeo machines. That complaint alleges the devices were “crippled by critical design flaws” with no permanent fix, and plaintiffs say they paid roughly $30,000 for units that became unusable. It is a separate case from the securities lawsuit and involves different plaintiffs and claims.
In April 2024, the company disclosed that the SEC’s Division of Enforcement had issued a subpoena in connection with a formal order of investigation. The company said it was cooperating but could not predict the duration, scope, or outcome of the probe.