The U.S. government is prosecuting Michael Malekzadeh, who earned a reputation as the sneaker king, for running what they say was a fraudulent, multi-million-dollar sneaker-scheme.
The owner of the now-dissolved Zadeh Kicks shoe company is charged with wire fraud, conspiracy to commit bank fraud and money laundering after many customers complained they paid thousands of dollars for sneakers they never received. He faces up to 30 years in prison if convicted.
Malekzadeh, 39, is also accused of falsifying over 15 loan applications to apply for over $15 million in funding.
He has pleaded not guilty to the charges. “Mr. Malekzadeh is not hiding from his conduct,” his attorney, Joanna Perini-Abbott, said. “He has consistently taken full responsibility for his actions and will continue to do so.”
A recent article by the Wall Street Journal detailed Malekzadeh’s fall from grace. His fiancé, Bethany Mockerman, 39, was also charged with conspiring with Malekzadeh to commit bank fraud while working as Zadeh Kicks’ chief financial officer, a press release from the Department of Justice states.
The Eugene, Oregon native rose to fame as the go-to sneakerhead after building a reputation for selling the most coveted kicks at prices cheaper than retail before they were released to the public.
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Sneaker resale is a multi-billion-dollar industry, and for some fortunate customers, Malekzadeh helped them make thousands of dollars in profit.
Malekzadeh rode the wave of success for a decade, often flaunting his luxurious lifestyle of high-end sports cars, million-dollar jewelry and a sprawling mansion.
Johnny Liu said he made such a profit doing business with Malekzadeh he wondered if it was on the up and up.
“There’s no way this guy can sell sneakers for 150 bucks, for something that costs the consumer $250, but guess what? The order actually came, and they were authentic,” Liu said of his 400-shoe order from Zadeh Kicks.
The problem: At some point, the sneaker king began selling shoes he didn’t actually have and bullying anyone who dared call him out publicly for it, prosecutors alleged.
According to the Federal Bureau of Investigation (FBI), Malekzadeh’s smoke and mirrors act unraveled when he sold 100 times the amount of the highly anticipated, limited-edition Air Jordan 11 Cool Grey sneakers at $110 below retail price.
Nike was charging $225 for the shoes, while Zadeh Kicks offered them for $115. He took 600,000 pre-orders for the sneakers but only had 6,000 pairs. He made $70 million in the process, but many customers complained they never got the shoes for which they paid.
“The ROI was simply insane,” Arnav Kamra, a finance major at Indiana University, told WSJ about a deal Zadeh Kicks was offering on some Jordan 1s. “I just convinced myself that I had to buy more.”
Kamra said he placed nearly $18,000 in various orders but was notified right before his 18th birthday the shoes would never come.
He wasn’t alone. According to Bloomberg, the court-appointed receiver responsible for overseeing the 60,000 shoes remaining in the Zadeh Kicks warehouse has gotten over 3,500 emails from customers who are still waiting on their sneakers.
Malekzadeh would try and make up for unfulfilled orders by offering customers the option to have him buy back their sneakers, get gift cards to his store, etc., to avoid refunding their money. Sometimes it was lucrative.
“I think within three cycles, I turned $6,000 into $20,000 just cycling through and letting him buy them back for me or giving me a gift card,” said 30-year-old Jeremy Rogers, who told Bloomberg he’s ordered over a thousand pairs of sneakers from Malekzadeh in the past two years.
Rogers admitted, however, that he did lose money on other orders that never came.
“This is a Bernie Madoff-size scam for the sneaker market,” Michael Schneider, CEO of sneaker reseller Secret Sauce, told WSJ. “He definitely had this image of being the end-all, be-all, backdoor plug.”