They buy collector’s shoes at low prices to resell them with peace of mind and pocket a capital gain. “They” are the shoe resellers, lovers of Nike or Adidas shoes who, for some, have made reselling shoes online their job. In America, Michael Malekzadeh has become one of the most famous in this field. But not for good reasons.
It was in Oregon, his home state and the birthplace of the Nike group, that Michael Malekzadeh launched Zadeh Kicks LLC, his sneaker resale business, in 2013. “From his warehouse (…), he offered highly valued sneakers at below-market prices. those of the market”, says Bloomberg. Problem: The now 39-year-old retailer was showing these tempting prices even before the manufacturers released the product.
Michael Malekzadeh is now suspected of having set up a Ponzi scheme that would have allowed his company to pocket millions of dollars. Accused d’avoir escroqué des milliers de personanes, celui que a été surnommé le “Bernard Madoff de la basket” doit rendre des comptes devant la justice américaine que l’accuse de fraud electronica, de plot en vue de commettre une fraud banaire et de money laundering. He faces up to 30 years in prison.
The Ponzi pyramid is a scam that consists of setting up a pyramid investment system in which the first clients are paid or reimbursed with the money injected by the newcomers. The pyramid eventually collapses once there are not enough new investors. American businessman Bernard Madoff is credited with being the author of the worst Ponzi financial scam in history.
Thousands of injured clients
Prosecutors said Malekzadeh was taking pre-orders and collecting money “for thousands of sneakers he didn’t have and couldn’t get, at least at commercially attractive prices,” says Bloomberg.
However, some buyers who sometimes ordered a hundred shoes received the products and were able to make a profit by reselling them online in the process. But others, victims of the established system, were not so lucky and lost thousands of dollars. To these customers, who have never seen the color of the sneakers ordered or only received a portion of them, Michael Malekzadeh offered gift cards as compensation to preserve his cash flow.
While this pattern has worked for years, it was a limited-edition pair of Air Jordans, the 11 Cool Grey, that brought Malekzadeh down. While Nike priced the pair at $225, Zadeh Kicks LLC offered them at $115, even before the model was released last December. The enthusiasm was immediate. Malekzadeh sold a total of 600,000 pairs and pocketed $70 million. But then the dealer actually only had 6,000 pairs.
$6.1 million seized
Since the Air Jordin 11 Cool Gray episode, Michael Malekzadeh has been the subject of a judicial investigation. The FBI seized $6.1 million in cash from his home along with watches and approximately 1,000 pairs of sneakers from his personal collection. Malekzadeh is also said to have spent much of his earnings buying Bentley, Ferrari and Lamborghini cars. He would also have bought bags, jewelry, furs and watches from Louis Vuitton for a total of 3 million dollars.
His company Zadeh Kicks LLC went bankrupt. But his warehouse would still house 60,000 pairs of sneakers, according to the federal court-appointed trustee. The sale of these shoes is one of the options on the table to reimburse some of the cheated customers. Especially since these limited edition shoes are not imitations. In the eyes of industry insiders, it remains a mystery how Michael Malekzadeh got his hands on so many rare pairs.
According to his attorney, the trafficker “voluntarily surrendered Zadeh Kicks and all of her assets to escrow and turned over millions of dollars of her personal assets, including cash and hundreds of valuables, to the federal government.” He “he did so knowing that these assets would be used to ensure that parties who suffered financial harm” obtained as much “fair and equitable” relief as possible.
Still, some angry customers gathered outside the Zadeh Kicks store multiple times, prompting Michael Malekzadeh to contact police four times, according to local media. The latter would also have installed security cameras to protect the warehouse from him. Last week, he pleaded not guilty to the charges against him. His fiancée is also being sued as the company’s chief financial officer. The trial will begin in June 2023.
Source: BFM TV
