The $1,750 gown was given by design label Theia and a source said when Lohan returned the gown, it was half its original length.
"She said that the dress had ripped (at a club after the fundraiser) - she couldn't possibly wear it like that - so her stylist friend went to the club bouncer and requested some scissors to repair the torn part of the dress. But what bouncer has scissors," said a source.
"She turned it into a mullet! Only a fashiony person would do that! She's out of control and behaving really badly," the source added.