Michael Malekzadeh
Michael Malekzadeh was in trouble. He owed a lot of money to a lot of people, and needed money. To
get some quick cash, Malekzadeh sold some of his most valuable possessions. Reportedly, he sold
80 luxury watches and 100 handbags. Along with other fund’s liquidated through cashiers checks,
the grand total came out to just $6 million. And that was only a fraction of what Malekzadeh owed
to his creditors, or victims, to be more accurate. How did Malekzadeh trick so many people
into giving him millions? And what other insane possessions did he buy with their money? Zadeh Kicks
Malekzadeh’s business actually began years before he got in trouble, in 2013. The business was legit
too. According to the Justice Department, his company was called Zadeh Kicks LLC, and based in
Eugene, Oregon, Malekzadeh’s hometown. Malekzadeh had just been fired from a Nike store in Portland
after starting there in 2012. What was he fired for? Buying shoes with his employee discount then
selling them at retail price for a sizable profit. Malekzadeh realized he could buy and
sell shoes like this on a mass scale, and make a lot of money in the process.
Before, Malekzadeh had been a University of Oregon graduate, then a student shoe
designer at the Art Institute of Portland. He’d always known he loved shoes, now
he could turn that love into a business, a real business. Zadeh Kicks could be his ticket
into the industry, and, hopefully, a wealthy life. Malekzadeh’s strategy was similar to the illicit
one he used at his old job at the Nike store: resell limited edition sneakers
online, mainly Air Jordan’s, and earn high profit margins. This is how
it worked: Malekzadeh would purchase the collectible footwear in bulk from manufacturing
and retail insiders, then resell them to online sellers over the internet. He was, in a
way, a shoe plug for other shoe sellers. Believe it or not, this is one of the most
lucrative retail sub sectors in the industry. Air Jordan
Ever since the creation of online retailers such as eBay, the internet has become a massive
hotbed for collectibles. And Air Jordans are one of the most sought after items out there. If you
put “air Jordan’s for sale” into Google you’ll get roughly 25 million results. If you put “air
Jordan’s” into EBay, you get over 500,000 results. Shoe manufacturers like Nike and Adidas
release limited edition sneakers not for people to wear on basketball courts,
but to put on shelves in their closet. They’re seen as status symbols to other sneaker heads and those a part of the
hip hip and basketball culture. Of course, some people wear them, but
they’re bought and sold as collectors items, for so-called sneaker heads.
Sneaker heads will do whatever they can to get the latest releases,
especially the latest Air Jordans. Websites such as stock x, GOAT, Flight Club,
and Kicks Crew sell these high value sneakers online. Malekzadeh wanted to be just like them.
And he got pretty close, on paper at least. His business was popular among some sneaker heads, but wasn’t on the same level. He and
his fiancé, and chief finance officer, Bethany Mockerman, were coming up with a plan
to change that. And it was the worst plan ever. Pre-Orders
Just like any other collectible industry, sneaker collectors
like to get their hands (or feet) on the product as soon as possible. It’s the same desire
that created the Black Friday stampedes, and the Harry Potter bookstore rushes. It’s a
strong desire. Malekzadeh knew this fact about his customers and decided to offer soon
to be released Air Jordan 11 Cool Greys sneakers for preorder on the Zadeh Kicks
website in 2020, his 7th year in business. At the time, Zadeh Kicks was
looking good. They currently had 6,000 Air Jordan 11s in stock, the same
edition Malekzadeh would put up for pre-order. 6,000 seemed like enough. But the move was still
risky, and Malekzadeh never set an order cap. Meaning, as far as his website was concerned,
he couldn’t run out of stock. Customers could keep buying and buying, regardless of
whether or not he actually had the shoes. And, according to the evidence, Malekzadeh's
client base was made up of other, much smaller sellers. These other sellers
bought these shoes in bulk from Malekzadeh, then sold them online for massive profits. It was a complicated, yet delicate ecosystem, fully dependent on the shoes
moving from one seller to another. That year, Malekzadeh would derail a
big chunk of the system, like COVID did, but with a financial virus called default. Zadeh Kicks received 600,000 pre-orders for
the new Air Jordan 11s. As mentioned earlier, Malekzadeh only had 6,000 in his inventory.
The sales from the 6,000 Air Jordan 11s was supposed to total around $900 k—instead
Malekzadeh pulled in $70 million. This may seem like a freak accident. However,
when looking at the details, investigators found some circumstantial evidence that might
indicate Malekzadeh planned the entire thing. Retail Price
Malekzadeh, being a longtime seller, knew the Air Jordan
11s had a retail price of $225 per pair. Collectors would be willing to pay that price,
of course. But other sellers would not, seeing as they’d lose money paying retail price for the
shoes then trying to sell them at used prices. These sellers, along with several collectors,
bought Malekzadeh’s nonexistent Air Jordan 11s. If Malekzadeh had any regrets or change of
heart, it was too late. Even though he had $70 million in his account, the ambitious
entrepreneur would lose millions trying to fulfill the orders. Millions he wasn’t
willing to spend, at least not on customers. There were so many that Malekzadeh would
have had to buy hundreds of thousands of shoes at retail price, which was
over $65 more than the pre-order price. The pre-order price ranged from
$115 all the way up to $200 per pair. Decadent Lifestyle
Malekzadeh didn’t waste much time spending his newfound
wealth. The shoe seller bought millions of dollars worth of fancy things: a fleet
of luxury sports cars, dozens of watches, purses, and even a Louis Vouitton bicycle. His
vehicle collection included multiple Ferraris, Bentleys, Porches, Lambos, Mercedes
Benz, and of course, the bike. Now, you’re probably still wondering
about the Louis Vouitton bicycle. Yes, you heard that correctly. A Louis
Vouitton bicycle does indeed exist. It’s made by Louis Vuitton and a French
bicycle manufacturer founded in 1912, called Tamboite. The bike Malekzadeh
retails at around $29,000. He and Mockerman spent even more
of their funds on fancy furs, designer handbags, and dozens of luxury watches. The young couple shared their luxurious
possessions on Instagram. Malekzadeh, for example, posted his over $100k Girard-Perregaux
watch next to a cheeseburger, and several shots of him riding over the floors of he and
Mockerman’s million dollar mansion in Oregon. The home’s down payment was paid with
the proceeds from their pre-order. They also used the same funds to
splurge on a $600,000 renovation to make their million dollar
mansion even more extravagant. Like many other scams, however,
the lavish spending was only an air pump filling up a proverbial
bubble seconds away from bursting. Covering Up
Even the beginning of Zadeh Kicks was shady. To help the young shoe crazy
Malekzadeh get his reselling business started, his father loaned him $20,000. But $20,000
wasn’t enough capital for Malekzadeh. In 2013, he and Mockerman, who had just started
dating, filed 15 loan applications to various banks. The loans, all together, added up
to $20 million. If you’re wondering how a young couple managed to legally obtain
$20 million in loans, well, they didn’t. Malekzadeh and Mockerman used falsified
documents in their loan applications. So, their $20 million shouldn’t have been
their’s, yet they spent it like it was. And, ironically, they spent it well in the beginning. As mentioned earlier, Malekzadeh was renowned for his ability to find shoes before any
other sellers could. For this reason, he was able to hook in small time sellers
selling on EBay and other online resale sites. They wanted someone with insider connections within the collectible sneakers marketplace.
And Malekzadeh provided those connections. One of Malekzadeh’s former peers,
the chief executive of Secret Sauce, Michael Schneider, remembers Malekzadeh.
He describes Malekzadeh as the “end all, be all back door plug.” That was his
image within the sneakerhead community. Arnav Kamra
One such member of the community was the young Arnav Kamra,
who started selling sneakers in 2020, when he was just 15.Today, Kamra is a finance
major at Indiana University, so it’s no wonder he was fascinated with the numbers driven
aspect of the sneaker resale market. Kamra was also driven by isolation.
Thanks to the sudden onset of covid 19, Kamra was forced to do his school
at home, leaving him with lots of free time. He decided to spend this extra
time selling sneakers over the internet. With some start-up capital from mom and dad, Kamra
founded his store. While looking for suppliers, Kamra stumbled upon Zadeh Kicks and couldn’t
believe what he was seeing. He recalls how, at the time, Zadeh Kicks was selling pairs of
Travis Scott edition Air Jordan 1s for only $590. Meanwhile, the luxury high tops were demanding a
staggering $2,000 on the sneaker resale market. Kamra couldn’t believe it. The
potential ROI on the Air Jordan 1s was “simply insane.” So insane that he bought
$18,000 worth of them in incremental orders. Another small-time seller, Minnat Azad, like
Schneider, believed Malekzadeh was the back door sneaker king. Azad pre-ordered 100 Air
Jordan 11s in 2020. He only received 50 of them. But, because of the ridiculously low
pre-order price set by Malekzadeh, Azad still made a $5,000 profit. Azad wasn’t
upset at all. In fact, Azad was so happy about the east profit, he purchased 400 more pairs of
Air Jordan 11s for a grand total of $100,000. Azad says he waited for the shoes to
come in, or at least half of them, like last time. He waited,
waited, but they never came. Azad wasn’t the only customer to experience
this form of commercial ghosting. Many of Malekzadeh’s other reselling customers
bore the same treatment, while others got something even worse: store credits.
Store credits for a store with no inventory. Malekzadeh also offered his customers gift
cards—gift cards to Zadeh Kicks. And, to make things worse, Malekzadeh gave his customers
no choice. The old refund policy from 2018, which stated they could cancel before
10 months with zero financial penalties, was thrown out in favor of a zero refund
policy. Unless you were willing to take store credit from a store who had completely failed
to fulfill your order, then you were screwed. The customers who did end up canceling had
to fork out a 50% cancellation fee. The old fee was only 20%. This was Malekzadeh’s way of
covering up his scam, and it wasn’t working. Testimonial
At one point, a customer named Damian Ortiz shared his
complaint on Zadeh Kick’s Instagram comment section. Malekzadeh didn’t immediately
respond to the comment. Instead, he sent Ortiz an email that had an almost
Godfather-esque tone. Malekzadeh wrote quote: “We want to give you a one time
courtesy (which we normally do not) that typically we BLOCK those who
do not follow our listed policies.” Ortiz had initially been complaining
about $14,000 worth of unfulfilled orders. The email indicated he wouldn’t be
getting his money back, and that, somehow, he was lucky to still have contact with Zadeh
Kicks. Fortunately for Ortiz, past profits with Zadeh Kicks allowed him to escape the upcoming
crash unscathed. Many others wouldn’t be so lucky. Realization
The unlucky customers eventually realized they wouldn’t
be getting their money back. According to the affidavit filed against Malekzadeh, Zadeh
Kicks had roughly 23,000 customers. For several thousand of those customers, it wasn’t
worth suing Malekzadeh. But for a select few thousand found themselves in a very big hole—one
customer was owed $15 million, for example. With so much money on the line, Malekzadeh’s
former customers were furious. They began sending Malekzadeh and Mockerman threats, some so
violent that the couple feared for their safety. Inevitably, Malekzadeh and Mockerman
hired a lawyer, who advised them on how to navigate the treacherous minefield
they’d created 2 years earlier. One of the first things they had to do was
shut down the chaotic cesspool that was Zadeh Kicks. The aforementioned Arnav Kamra
remembers that day more than anyone else. It was only two days before his 18th birthday
when he received an email from Zadeh Kicks, announcing they were closing down
and dissolving the entire operation. Authorities seized Malekzadeh’s
assets, including his luxury items and any remaining inventory. To help
sift through all the shoes Malekzadeh and Mockerman had stock piled in their company
warehouse, investigators called in Nike. Nike had representatives analyze the sneakers,
most of which were Nikes. They found only 8,500 Adidas shoes and 48,000 Nikes—as well as
1,100 sneakers in Malekzadeh’s private stash. So far, Nike declined to comment on the
investigation to Wall Street Journal. Naturally, they have an interest in clearing
this disaster up. Many sneaker world outsiders are wondering how hundreds of
thousands of Nike shoes are being acquired by sellers like Malekzadeh. All before
retailers can even open a delivery box. People also wondered how this would
affect the shoe resale market. With so many small and medium sized businesses,
many run by only one or two individuals, their chances of surviving
financially seemed slim. The businesses who got hit the hardest
asked Investigators and Nike to hand over the sneakers in the warehouse, arguing
that they were owed whatever was left. Of course, there weren’t enough shoes, or money, leftover to pay back all of Malekzadeh’s
victims. These victims who got the short end of the stick weren’t through with
Malekzadeh, especially American Express. American Express
American Express is currently suing Malekzadeh and Mockerman for
unpaid credit card debt. The debt is around $2 million. They’re also seeking $3,000 in
damages. With all the money Malekzadeh made it seems bizarre that he failed to pay a $2 million
dollar debt. But since Malekzadeh spent a good chunk of it on expensive things he didn’t need,
as well as more shoes, he was quite cash poor. At the beginning of this video, we described
Malekzadeh selling off his assets for cash. That was a direct result of his spending. The
feds managed to extract around $6 million from his accounts to pay off swindled shoe customers,
but didn’t have anything for American Express. While the American Express lawsuit is
a major problem in Malekzadeh’s life, it’s only a small morsel on
his already loaded plate. Today
If Malekzadeh is found guilty of all the charges against
him, he could face 30 years in prison. Prosecutors are charging him for multiple
counts of fraud from the pre-order scam, and bank fraud for the loans they
obtained with falsified documents. Prosecutors summarize what Malekzadeh did as
a sort of Ponzi scheme. He borrowed money, illicitly that is, then it used to
buy shoes that he’d sell but never actually ship to his customers.
All to fund a lavish lifestyle. As of this video’s publishing, the FBI is
still searching for victims of Zadeh Kicks. Click to watch one of these next videos! Let us know in the comment section
what your opinion of resellers of any given collectible. Are they helpful
or hurtful to the end consumer overall?