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The former owner of Zadeh Kicks, a now defunct company that sold limited edition and collectible sneakers online, has been arrested and charged after he allegedly perpetrated a fraud scheme that cost customers more than $70 million in unfulfilled orders and financial institutions for more. than $15 million.
Michael Malekzadeh, 39, of Eugene, Oregon, has been charged with wire transfer fraud, conspiracy to commit bank fraud and money laundering. His fiancée, Bethany Mockerman, 39, has also been charged with conspiring with Malekzadeh to commit bank fraud. Both plead innocent.
Malekzadeh started his business in 2013 by buying limited edition and collectible sneakers to resell online – with scarcity and coolness boosting profits – but things really took off as the pandemic spread.
Michael Malekzadeh has been accused of orchestrating a Ponzi scheme that stole customers over $70 million dollars worth of sneakers
Malekzadeh was charged with wire transfer fraud, conspiracy to commit bank fraud and money laundering along with fiancé, Bethany Mockerman, also 39, right
In early 2020, Zadeh Kicks began offering sneaker pre-orders ahead of their public release dates, able to rarest Nike Air Jordans, along with Yeezys.
It allowed Malekzadeh to raise funds upfront before fulfilling customer orders. But Malekzadeh has reportedly advertised, sold and collected payments from customers for pre-orders, knowing full well that he could not fulfill all the orders placed.
Hailing from Eugene, Malekzadeh originally graduated from the University of Oregon in 2005.
He worked for a Nike store near Portland in 2010, but was later fired for reselling items purchased with an employee discount.
His social media followers were treated to photos of him riding a $29,000 Louis Vuitton bicycle in the Oregon mansion
In early 2020, Zadeh Kicks began offering sneaker pre-orders ahead of their public release dates, able to get their hands on the rarest Nike Air Jordans, along with Yeezys
Malekzadeh started selling pre-orders of Nike Air Jordan 11 Cool Gray sneakers. He put the sneakers on sale for between $115 and $200 a pair — much cheaper than their projected retail price of about $225.
He met Mockerman in 2013 when he plunged into selling sneakers.
Over the years, Malekzadeh became known in the sneaker world for offering to sell highly sought-after sneakers, especially Jordans and Yeezys, for below-market prices long before manufacturers released them to the public.
The plan was supposed to have gone through into 2021, but according to the FBI, Malekzadeh’s “fraud ran for years — and unraveled in months.”
At once, Malekzadeh started selling preorders of Nike Air Jordan 11 Cool Gray sneakers.
He put the sneakers on sale for between $115 and $200 a pair — much cheaper than the estimated retail price of about $225.
Malekzadeh regularly flaunted his alleged wealth and luxury items, including expensive watches and luxury cars
The company received and accepted pre-order sales for more than 600,000 pairs of sneakers, resulting in payments to Malekzadeh of more than $70 million.
But Malekzadeh couldn’t get the amount of sneakers needed to fill the pre-orders he had received and, in fact, was only able to acquire just over 6,000 pairs.
Customers claim that they collectively paid millions of dollars for orders that were not fulfilled or received a combination of cash and crappy Zadeh Kicks gift cards.
By April 2022, Malekzadeh owed customers more than $70 million in undelivered sneakers and unknown additional millions that customers had in crappy corporate gift cards.
The following month, the company was dissolved, while Malekzaeh’s social media accounts were also scrubbed.
Meanwhile, followers were treated to him showing off his collection of Ferraris, Girard-Perregaux timepiece and photos of him riding a $29,000 Louis Vuitton bicycle in the Oregon mansion, the Oregon mansion reports. Wall Street Journal.
Malekzadeh made most of his profits opening pre-orders for coveted sneakers he didn’t actually have in stock
In the past two years alone, he is estimated to have spent more than $10 million of the pre-order money on luxury items for himself and his girlfriend, including watches, furs, and handbags.
Federal authorities have alleged that the couple used the client’s money to make a down payment on a home, along with $600,000 worth of remodeling work.
In a lawsuit, the company alleges that it experienced “exponential growth in business” from January 2020 to May 2022, mainly due to pre-orders, and that it was unable to keep up with its rapid growth due to inadequate “internal systems and processes.” ‘
Fiance, Mockerman, who served as Chief Financial Officer of Zadeh Kicks, is alleged to have colluded with Malekzadeh to provide false and altered financial information to numerous financial institutions, including providing altered bank statements on more than 15 bank loan applications.
Together, Mockerman and Malekzadeh received more than $15 million in loans from such bank applications.
As part of the government’s ongoing criminal investigation, federal agents have now seized millions of dollars in cash and luxury goods that Malekzadeh obtained with the proceeds of his fraud.
The seized items include nearly 100 watches, some worth more than $400,000, jewelry and hundreds of luxury handbags.
More than 59,780 pairs of shoes are also in the hands of a court-appointed trustee who must sell them as soon as possible to raise money for the victims.
But even if all the sneakers in Malekzadeh’s personal collection and inventory are sold, the amount raised is unlikely to cover what the victims owe.
“This is a Bernie Madoff-sized scam for the sneaker market,” Michael Schneider told WSJ, a sneaker salesman. “It definitely had the all-in-one backdoor plug-in image.”
In his warehouse it is said that 4,700 Yeezys, 8,500 Adidas shoes and 48,000 Nike shoes, which many believe are coveted Air Jordans, plus about 1,100 pairs from Malekzadeh’s personal collection.
Collectively, the lot is estimated to be worth between $12 million and $20 million reports Fortune.
Thousands of people and businesses have filed claims with one creditor suggesting they owe $15 million.
Court documents show that the company had 23,000 customers with unfulfilled orders dating back to 2018.
Nearly $6.4 million in cash was also seized, resulting from Malekzadeh’s sales of watches and luxury cars manufactured by Bentley, Ferrari, Lamborghini, Porsche and others.
Malekzadeh and Mockerman are said to be cooperating in the government’s investigation, which includes the seizure of their assets.
Malekzadeh’s most serious charge, conspiracy to commit bank fraud, carries a maximum sentence of 30 years in prison if convicted.