- A $300 million sneaker mogul is facing extensive fraud charges over the sale of popular shoes.
- Michael Malekzadeh operated a preorder scheme allowing him to charge without stocking the sneakers.
A sneaker mogul who made millions of dollars selling Air Jordans in the sneaker resale business is facing charges of fraud as his $300 million empire crumbles.
Michael Malekzadeh, founder of Zadeh Kicks, and his fiancee Bethany Mockerman are facing charges brought by US authorities for their involvement in the alleged fraudulent sale of sneakers, including Yeezys and Nike Air Jordans.
Filings say Malekzadeh would advertise sneakers before their release date at or below retail price, helping drive demand. He pre-sold Nike Air Jordan 11 Cool Grey sneakers for $115 to $200 a pair, while they retailed at $225.
But the filing says Malekzadeh could not purchase the sneakers for less than the price he would sell them at.
"In other words, Malekzadeh collected money for preorder sales from victim customers knowing that actually fulfilling the orders would be financially ruinous," prosecutors argue.
Malekzadeh has been charged with wire fraud, conspiracy to commit bank fraud which carries a 30-year maximum sentence, and money laundering. Mockerman has also been charged with conspiring with Malekzadeh to commit bank fraud.
Malekzadeh, 39, from Eugene, Oregon, went on to accept preorder sales for 600,000 Air Jordans from customers, helping him rake in $70 million. In reality, prosecutors say, Zadeh only had 6,000 of the sneakers in stock.
He wouldn't repay customers in full, the filing says, but would offer a combination of refunds and gift cards to "buy back" the sneakers, allowing him to keep more cash profits. Malekzadeh would threaten customers over email with a ban if they publicly complained about unfulfilled orders, The Wall Street Journal reported.
Zadeh Kicks rode the wave of an increasingly lucrative market for limited edition and collectible sneakers, which benefitted from speculation for in-demand shoes.
A separate lawsuit brought by American Express shows Zadeh brought in revenues of more than $300 million in 2021, according to the company's financial statements. Malekzadeh himself was said to be worth more than $7 million.
Prosecutors say Malekzadeh spent the proceeds of his income on Bentley, Ferrari, Lamborghini, Porsche, and Mercedes cars, over $3 million paid to Louis Vuitton for luxury bags, as well as watches priced as high as $600,000.
He was filmed riding a $29,000 Louis Vuitton bicycle inside his million-dollar home in Eugene, the Daily Mail reported.
Malekzadeh and Mockerman liquidated more than $6 million in cashier's checks last week, in addition to 80 luxury watches and more than 100 handbags, to pay debts.
Malekzadeh faces another lawsuit from American Express for unpaid charges, with the group pursuing him for millions more in damages, filings show.
Malekzadeh and Mockerman have pleaded not guilty to the charges. Lawyers for the pair didn't immediately respond to Insider's request for comment.