An Oregon man and his fiancée have been accused of orchestrating what amounts to a Ponzi scheme through a now-defunct sneaker business by allegedly accepting presale orders that they knew they couldn't fulfill.
For almost a decade, Michael Malekzadeh, 39, owned Zadeh Kicks LLC, an online sneaker company based out of Eugene which bought limited edition sneakers and resold them. For six years or so, the business supposedly operated as advertised. However, in 2019, Malekzadeh began collecting presale orders for rare shoes. By 2020, he allegedly marked presale orders well below cost in order to entice more orders, knowing that he would never be able to acquire enough shoes to fill all the orders he'd received.
For example, prosecutors claim that Malekzadeh processed orders for more than 600,000 pairs of Nike Air Jordan 11 Cool Grey sneakers in 2021, generating over $70 million in presale revenue, but was able to acquire only 6,000 pairs of shoes. Malekzadeh supposedly compensated the 594,000 customers who never received their orders with a small refund combined with a store gift card, which prosecutors have called "worthless" in court filings.
For reasons unclear, he sometimes even offered shoeless customers more than they paid, according to the Register-Guard.
Meanwhile, Malekzadeh's fiancée, Bethany Mockerman, also 39, was the chief financial officer of Zadeh Kicks, and she allegedly defrauded partners on the other end of the business by falsifying financial forms submitted to lending institutions to secure loans. Court filings claim that by altering bank statements, she and Malekzadeh amassed approximately $15 million in fraudulent loans on behalf of Zadeh Kicks.
It is unclear when Mockerman began working for Zadeh Kicks.
Federal prosecutors have charged Malekzadeh with wire fraud, conspiracy to commit bank fraud, and money laundering. Mockerman has been charged with conspiracy to commit bank fraud.
Malekzadeh shuttered Zadeh Kicks back in May. FBI agents have since seized approximately $6.4 million in assets, including cash, 100 watches, other jewelry, luxury cars, and hundreds of handbags. Malekzadeh has also been listed as a manager and agent for Eugreen Farms LLC, a local cannabis company. A designated receiver is now in charge of the remaining assets at Zadeh Kicks.
Both Malekzadeh and Mockerman are said to be cooperating with investigators. Malekzadeh's attorney, Joanna Perini-Abbott, insisted that her client is "not hiding from his conduct." Likewise, Mockerman's attorney, Whitney Boise, claimed that Mockerman "remains committed to doing what she can do to minimize the financial harm to Zadeh Kicks’ customers and creditors.”
Both pleaded not guilty during a virtual hearing in federal court on Wednesday. Their trial has been set for June 2023.