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A rare sneaker broker who made $300 million by scamming customers out of more than $70 million worth of shoes has been arrested for his Ponzi-like scheme.
Michael Malekzadek, the former owner of Zadeh Kicks, a now-defunct company that sold limited edition and collectible sneakers online, has been arrested and charged for defrauding financial institutions out of more than $15 million.
Malekzadeh, 39, from Eugene, Ore., has been charged with wire 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 have pleaded not guilty.
Malekzadeh started his business in 2013 by purchasing limited edition and collectible sneakers to resell online – with scarcity and coolness inflating profits – but things really moved into overdrive during the COVID-19 pandemic.
Michael Malekzadeh has been accused of orchestrating a Ponzi scheme that scammed customers out of more than $70 million dollars worth of sneakers
Malekzadeh, together with his fiancée, Bethany Mockerman, 39, has also been charged with conspiracy
Part of Malekzadeh’s warehouse is seen here. The Feds are now attempting to liquidate the stock in order to get some money back for those who have lost after their orders were not fulfilled
In early 2020, Zadeh Kicks began offering preorders of sneakers before their public release dates by being able to get his hands on the rarest Nike Air Jordans and Yeezys.
Because the items weren’t yet on the market, Malekzadeh was able to collect the money upfront, before fulfilling customer orders.
It is alleged that he advertised, sold and collected payments from customers for preorders knowing full well he couldn’t satisfy all the orders that had been placed.
The scheme is alleged to have continued throughout 2021; according to the feds, Malekzadeh’s ‘fraud ran for years – and unraveled in months.’
Malekzadeh’s social media followers were treated to pictures of him riding a $29,000 Louis Vuitton bicycle inside his Oregon mansion, according to the blog nicekicks.com
Malekzadeh began selling preorders of Nike Air Jordan 11 Cool Grey sneakers. He put the sneakers on sale for between $115 and $200 a pair – far cheaper than their expected retail price of around $225
Malekzadeh would regularly flaunt his perceived wealth and luxury items including pricey watches and luxury cars
In once such scheme, Malekzadeh began selling preorders of Nike Air Jordan 11 Cool Grey sneakers. He put the sneakers on sale for between $115 and $200 a pair – far cheaper than their expected retail price of around $225.
The company received and accepted preorder sales for more than 600,000 pairs of sneakers resulting in payments to Malekzadeh of more than $70 million.
But he had nowhere close to the number of sneakers needed. In fact, he was only able to acquire roughly 6,000 pairs for the 600,000 orders.
By April, Malekzadeh owed customers more than $70 million in undelivered sneakers and unknown additional millions held by customers in worthless company gift cards.
In early 2020, Zadeh Kicks began offering preorders of sneakers before their public release dates by being able to get his hands on the rarest Nike Air Jordans and Yeezys
The following month, his business was dissolved while Malekzaeh’s social media accounts were also scrubbed.
Before that, Malekzaeh showed off his collection of Ferraris and Girard-Perregaux timepiece and posted pictures of him riding around on a $29,000 Louis Vuitton bicycle inside his Oregon mansion, according to the blog, nicekicks.com.
In the last two years alone, it’s estimated that he spent more than $10 million of the preorder money on luxury items for himself and his fiancée Mockerman, including watches, furs and handbags.
Federal authorities have alleged the pair used customer money to make a down payment on a house together with $600,000 of remodeling work.
In a court filing, the company states that it ‘experienced exponential growth in business’ from January 2020 to May 2022, primarily owing to preorders, and that it was unable to keep up with the rapid growth because of inadequate “internal systems and processes.” ‘
Mockerman, who was Zadeh Kicks chief financial officer, allegedly conspired 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.
Malekzadeh profitted by opening preorders for coveted kicks he didn’t actually stock
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 acquired with the proceeds of his alleged fraud.
The seized items include nearly 100 watches, some valued at over $400,000, jewelry, and hundreds of luxury handbags.
More than 59,780 pairs of shoes are also in the hands of a court-appointed receiver who needs to sell them off as soon as possible in a bid to raise funds for those defrauded.
Though the amount raised is unlikely to cover what the victims are owed.
‘This is a Bernie Madoff-size scam for the sneaker market,’ Michael Schneider, a sneaker reseller, told the Wall Street Journal reported. ‘He definitely had this image of being the end-all, be-all, backdoor plug.’
Michael Malekzadeh has been accused of orchestrating a Ponzi scheme that swiped customers of more than $70 million dollars worth of sneakers
Reportedly stocked in Malekzadeh’s warehouse are: 4,700 Yeezys, 8,500 Adidas shoes and 48,000 Nike shoes – many of which are believed to be highly coveted Air Jordans – plus about 1,100 pairs from Malekzadeh’s personal collection.
The lot is estimated to have a value between $12 million and $20 million, Fortune reported.
Thousands of people and businesses have filed claims with one creditor suggesting they are owed $15 million. Court documents reveal the company had 23,000 customers with unfilled orders stretching back to 2018.
Nearly $6.4 million in cash has also been seized, which was the result of Malekzadeh’s sale of watches and luxury cars manufactured by Bentley, Ferrari, Lamborghini, Porsche and others.
Malekzadeh and Mockerman are said to be cooperating with the investigation, including the seizure of their assets.
The most serious of Malekzadeh’s, conspiracy to commit bank fraud, carries a maximum 30-year prison sentence if convicted.
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