However, a source close to the star has told Fox News that the whole story appears to be a 'big publicity stunt' and she is not worried on facing prosecution.
"It's totally ridiculous, Lindsay didn't steal the jewellery. She knows she didn't do anything wrong so she isn't worried," said our insider, adding that Lohan is '100 percent sober' and in positive spirits.
Law enforcement officials confirmed that they have video footage of Lohan wearing the missing necklace and that a warrant to search Lohan's Venice residence was requested on Tuesday.
According to reports, the actress attempted to dodge a bullet Wednesday when she was 'tipped off' about the potential warrant, just before the necklace was hastily returned to an LAPD substation.
Lohan has claimed that she did not intentionally steal the jewellery, rather it was 'borrowed' from the store on January 22 and she returned it to a stylist who then neglected to give it back.
But according to TMZ, returning the item doesn't mean she is out trouble just yet.
The District Attorney is expected to examine the case this week and decide whether Lohan should be prosecuted over the alleged theft.
And that could mean big trouble for the 'Mean Girls' star, although it may be hard to prove.
"If she did in fact do something criminal, this would be a violation of her probation and they could punish her for that," said California Criminal Defense Attorney Angelyn Gates.
"We don't really know what the truth is right now but assuming what Lindsay has said is true, this seems like a big waste of everyone's time, she said.
"There is no proof that Lindsay is the one that actually stole it," she added. (ANI)