Michael Malekzadeh was the king of sneaker resale.
With his company Zadeh Kicks he had become a multimillionaire and lived a luxurious life in his mansion in Eugene (Oregon) with his partner, Bethany Mockerman, who served as the company's financial director.
Now his house is for sale and they both run a serious risk of ending up in prison.
His empire has collapsed like a house of cards.
Its success hid a pyramid scheme, according to the prosecutor's office and the FBI, who put the fraud at 85 million dollars (about 83 million euros), of which 70 million were in sneakers without delivering them to the buyers who had paid for them in advance.
Zadeh Kicks' biggest seller was also the one that buried the company.
In 2021, Malekzadeh began receiving pre-orders for Nike Air Jordan 11 Cool Gray sneakers, before the company itself brought them to market.
His proposal was unbeatable, he sold them at 115 or 120 dollars, practically half the expected price for the launch, of about 225 dollars.
Zadeh Kicks received orders for more than 600,000 pairs of sneakers, which he paid for in advance, bringing in more than $70 million.
In reality, Malekzadeh had no way of buying the number of sneakers needed to satisfy all those orders.
In fact, he was only able to acquire just over 6,000 pairs, always according to the prosecution's account.
Customers kept undelivered orders or received a combined refund of cash and Zadeh Kicks gift cards.
Millions of dollars of those cards have also become worthless.
While the business had been smaller, Malekzadeh had been able to finance the discounts with the new orders he received and deliver the old orders to his clients.
As in any pyramid scheme or Ponzi scheme, there are those who benefit and spread the word until the deception becomes unsustainable.
The special editions of sports shoes have become a multi-million dollar business in recent years.
The companies, with Nike in the lead, launch low print runs of some models that they raffle among the customers who sign up.
Supply is much lower than demand.
The company raffles the winners, but then there is a secondary market in which these sneakers are sold for a much higher price.
They have become an investment asset, given the revaluation of some models, in particular Nike's Air Jordans and Yeezys, marketed by Adidas.
Malekzadeh, who is now 39 years old, was one of the pioneers of that business and founded Zadeh Kicks in 2013. The indictment does not clarify since when what was a resale business became a pyramid scheme, but the ball was growing steadily. unstoppable, especially when the company started selling the shoes at clearly below-market prices.
Starting in January 2020, Zadeh Kicks began offering sneaker pre-orders ahead of their release dates, allowing you to put in money upfront, even knowing you couldn't meet the sales you made.
The company operated from the State of Oregon, where Nike is also based.
Some customers bought tens or hundreds of pairs to resell them in turn.
Sometimes Zadeh Kicks herself would buy them back with her gift cards.
As the first trades went well, they increased their bets.
There are clients who have lost more than 100,000 dollars.
Complex, a media specializing in pop culture, interviewed a client who said he had been trapped for half a million dollars.
The image of success that it conveyed for years allowed the couple to cheat even the banks.
As CFO of Zadeh Kicks, Mockerman conspired with Malekzadeh to provide numerous financial institutions with false financial information, including doctored bank statements, on more than 15 loan applications.
They received more than $15 million from those requests.
Zadeh Kicks claimed that her turnover was 340 million dollars and her profit was 17 million dollars.
The couple had no qualms about leading a full-throttle life.
The FBI has seized millions of dollars in cash and luxury goods that Malekzadeh bought with the proceeds of his scam.
The seized items include nearly 100 watches, some valued at more than $400,000, jewelry and hundreds of handbags from Louis Vuitton and other luxury brands.
Authorities have also seized nearly $6.4 million in cash from Malekzadeh's sale of watches and luxury cars from Bentley, Ferrari, Lamborghini and Porsche, among others.
His house in Eugene is for sale for 1.8 million dollars, according to the specialized publication Nicekicks.
The photos of the interior of the house show shelves where the thousand slippers from his personal collection were, also seized.
Zadeh Kicks filed for bankruptcy and was legally intervened last May.
The FBI is looking for the victims of the scam and has launched an online form for them to sign up.
Malekzadeh is charged with wire fraud, conspiracy to commit bank fraud and money laundering.
Mockerman has been charged with conspiring to commit bank fraud.
Malekzadeh has appeared in court this week and has pleaded not guilty.
Malekzadeh's lawyer, from the firm Angeli Law Group, has assured through a statement released by local media that his client "does not hide from his conduct."
“He has consistently taken full responsibility for his actions and will continue to do so.
He has fully cooperated with the federal government and the receiver since day one because his primary goal is to minimize financial harm to his clients and other stakeholders,” he adds.
The defense stresses that even before criminal charges were filed, Malekzadeh turned the company over to a receiver and provided millions of dollars of his personal assets to authorities.
Among them, his sneaker collection.