They Had No Clue He Was the Bernie Madoff of the Rare Sneaker Market!

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?