On 15 September 2005, the Daily Mirror ran front page and inside photos that seemed to show Moss snorting several lines of a white powder that was presumed to be cocaine at a Babyshambles recording session. It was also reported that Moss snorted five lines in 40 minutes.It has been alleged by Babyshambles' singer Pete Doherty that James Mullord, his former manager, sold the photos to the newspaper for more than £150,000 and spent the money on heroin.
On 20 September 2005, the Swedish fashion retailer H&M, which had intended to feature her in a campaign of their autumn clothes range designed by Stella McCartney, announced it was dropping Moss after the drug allegations.The contract was reportedly worth £4 million a year.A day later, Chanel announced that it would not be renewing its contract with Moss, which was set to expire that October, although the company said that its decision had nothing to do with the drug scandal. Burberry also decided to drop Moss's campaign with them.Moss quickly issued an apology, though she stopped short of admitting drug use.
Moss continued to appear in major ad campaigns during this period for Dior. She was on the cover of the November 2005 W and also appeared inside in a multi-page fashion shoot. She was also defended by designer Alexander McQueen, who, during his walk-out after a fashion show, wore a t-shirt saying "We love you Kate". Artist Stella Vine also publicly supported Moss, and paintings by Vine of the model, painted during the scandal, were exhibited and reproduced in the press.
In November 2005, Moss ended her relationship with Doherty soon after he checked himself out of Meadows Clinic in Arizona, failing to complete a programme for drug rehabilitation. Moss herself underwent successful treatment there in October and had urged Doherty to seek the same treatment himself. Doherty claims that their separation involved other issues, telling The Sun that Moss left him because, "I can’t buy her diamonds." On 5 January 2006, the Metropolitan Police asked Moss to return from the US to Britain to answer questions about the September 2005 cocaine scandal. The following day, the Daily Mirror reported that Moss would return to Britain and face arrest for allegations of cocaine usage. She was interviewed by police in London on 31 January 2006, with her solicitor present, but reportedly made no admissions, and she was not arrested (photographs of alleged drug-taking are not admissible evidence in English courts). On 16 June 2006, British police finally dropped the charges for lack of evidence. Ultimately, Moss was cleared of all charges and resumed her modelling career. Criticism of Moss has continued, and her career revival has been viewed as a sign of moral and cultural decline by critics such as Peter Hitchens.