Models are reportedly accusing fashion retailer Rainbow Shops of using AI to create lookalike images of them around the same time that their work with the company dried up.

According to a report by Business Insider, budget retailer Rainbow Shops, which was founded in Brooklyn, New York, sent an email to its fashion models in June 2025 warning them that the rise of AI technology would mean fewer jobs.

In a previously unreported email sent to models that was cited by the news outlet, Rainbow’s studio manager Phil Caraway said that the company had started “styling certain products, and generating avatars, with the assistance of AI.” While he couldn’t say for certain whether any freelancers would lose their jobs, Caraway reportedly wrote that “fewer people will be needed in the long term.”

After Carraway’s email last year, the models reportedly expected their work to slow down. Several said that for months afterward they still continued to receive regular bookings. However, they tell Business Insider that by mid-March of this year, assignments had stopped coming in. Some models say they submitted their availability but never received a response from Rainbow. During the same period, two Rainbow employees who are not models allege they went weeks without seeing any human models in the studio.

Then in March of this year, Business Insider reports that models began noticing Rainbow marketing images that looked distinctly like them, but posed in positions or locations that differed from the photo shoots they had participated in with the retailer. Many of the models suspected that the retailer had used AI to create their the doppelgängers, and these lookalike models were now cropping up across Rainbow’s site, social media, and newsletters.

These models had previously taken part in product shoots wearing Rainbow clothing, including items such as a long floral dress, and were photographed against plain backgrounds. But now they reportedly noticed lookalike images that appeared very similar to them — matching body types, facial features, and outfits they had worn — but with their bodies shown in different poses.

This prompted a series of emails from the models to Rainbow regarding the alleged AI-generated images of them. One model Francheska Pujols filed a lawsuit against Rainbow on May 22, claiming the images defamed her and created confusion about her endorsement of the company’s products, among other allegations.

According to Pujols, Rainbow posted images she describes as her AI doppelgänger. In one, she is shown straddling a barstool. In another, she is seated wearing a short skirt with one leg raised. In an affidavit, Pujols states that her contract only covered images taken during photo shoots and “does not in any way authorize the creation of entirely new images, scenes, poses, or compositions that did not exist in the original content.”

In a statement to Business Insider, Pujols says she would “never pose with my legs open or position myself in a sexualized manner for the world to see” as shown in the alleged AI-generated images on Rainbow’s site. Pujols says she has had “many sleepless nights with the thought of the altered images” of herself.

Pujols briefly withdrew her lawsuit against Rainbow on May 29 to resolve the matter privately and pursue a private settlement with the retailer. However, according to a report by WWD, Pujols refiled her case against Rainbow at the New York State Supreme Court on June 15.

In a statement to Business Insider, David Cost, who is Rainbow’s chief digital officer, writes that the company is “responsibly evaluating emerging AI technologies in the marketplace, and has and is committed to doing so in a proper manner.” In a follow-up email, Cost declined to comment on specific questions sent by the news outlet, saying that “Rainbow has acted appropriately and in accordance with its commitments, including contracts signed by models.”