Former Obagi CEO charged with defrauding public company and shareholders

Federal prosecutors in New York have charged former Obagi CEO Jaime Castle with defrauding Waldencast and its shareholders by allegedly inflating the cosmetics company's revenue and financial performance ahead of its acquisition.

The U.S. Attorney's Office for the Southern District of New York said the indictment was unsealed on May 18, 2026. Prosecutors allege Castle inflated Obagi's results from 2021 through 2023 to make the company appear stronger as Waldencast pursued a deal for the skincare brand.

According to the Justice Department, the alleged scheme helped Obagi look like a more attractive acquisition target. The indictment also says Castle later lied to auditors and company management.

The DOJ said Castle allegedly received a bonus of more than $2 million tied to the acquisition.

Waldencast completed its merger with Obagi and Milk Makeup in 2022. In April, Waldencast said the SEC had concluded its investigation into the company's restatement and historical Obagi accounting practices and did not intend to recommend enforcement action against Waldencast.

The criminal case adds a new legal risk around the accounting issues tied to Obagi's pre-acquisition financial reporting. The research reviewed did not show a public response from Castle or a plea in the case.

The next developments to watch are whether Castle responds publicly, whether prosecutors add more charges, and whether any further company statements follow the indictment.