Shoe retailer charged in federal court for defrauding customers


For months, customers have wondered if Eugene sneaker dealer Michael Malekzadeh ripped them off, using their pre-order money to support a lifestyle filled with expensive sports cars and watches.

Now Malekzadeh has been charged in federal court with running a nationwide Ponzi scheme to defraud thousands of clients, owing them more than $70 million before his company, Zadeh Kicks, dissolved in May, prosecutors say. .

The charges were made public last Friday in US District Court and document some of the same allegations angry clients had about Malekzadeh’s operation.

Charges include wire fraud, conspiracy to commit bank fraud and money laundering. Malekzadeh’s fiancée, Bethany Mockerman, who acted as Zadeh Kicks’ chief financial officer, was also charged with conspiracy to commit bank fraud.

On Wednesday, Mockerman and Malekzadeh pleaded not guilty during a video call appearance at the Eugene Federal Courthouse. They also waived their right to a grand jury indictment. Their trial is due to begin in June 2023.

During the hearing, Malekzadeh’s attorney, Joanna Perini-Abbott, said Malekzadeh had sold assets involved in the case and would hand over the proceeds to the government.

Some of the company’s victims have posted information about the refunds they have received in recent weeks in the “Zadeh Relief Group” on the Discord messaging app. Malekzadeh is also listed as a director and agent of local cannabis company Eugreen Farms LLC.

Become famous and fall apart

Zadeh Kicks LLC was officially established by Malekzadeh in 2013. It was a popular online option for sneakerheads – people who collect and trade sneakers, often rare or exclusive shoes from brands like Nike and Adidas that cost hundreds to thousands of dollars. The company promised customers eventual delivery of valuable shoes that had not yet been released, often below retail price, which attracted other dealers eager to make a profit.

On May 19, the company filed for dissolution in Lane County Circuit Court and asked for a court-ordered receiver to take control of the remaining assets.

Shortly thereafter, the company’s website was shut down. Malekzadeh deleted his social media accounts and some irate customers started trying to contact him in person.

“Lots of red flags”:Clients owed millions, FBI investigates after Zadeh Kicks disbanded

Eugene police were called to the Malekzadeh warehouse in west Eugene multiple times, reporting “suspicious persons and circumstances,” according to police department spokeswoman Melinda McLaughlin..

Police call logs show officers responded to Malekzadeh’s main warehouse four times in the two weeks since the breakup, including one report for criminal trespassing, two for “suspicious conditions” and one request for reinforcement after reports of a gunshot.

With the dissolution, Malekzadeh asked a court-appointed receiver to take control of the remaining assets. David Stapleton, the receiver, did not respond to requests for comment.

After the breakup, the FBI began investigating the company.

Allegations of a ‘financially ruinous’ scheme

In 2019, Malekzadeh went from only selling shoes he bought to taking pre-order money for shoes that hadn’t been released, offering them at, near, or below suggested retail price for increase orders, prosecutors say.

Malekzadeh was unable to purchase the sneakers below the price he asked customers, but still bought shoes from third-party vendors at or above retail price, which means that he knew it would be financially ruinous, prosecutors said.

In the fall of 2020, Malekzadeh was receiving money from customers knowing he couldn’t fulfill all of their orders.

Instead of refunding customers for undelivered sneakers, Malekzadeh offered a combination of refunds and gift cards to those who didn’t receive sneakers. He also offered more money than they originally paid, prosecutors said.

Eugene-based sneaker resale company Zadeh Kicks was dissolved in Lane County Circuit Court on May 19, 2022. The company sold prized sneakers that have yet to be released, as in this screenshot from company website screen.  Thousands of customers say they are owed money for shoes they paid for that were never delivered.

Offering gift cards under the scheme allowed Malekzadeh to keep more of the profits from the pre-sale scams, according to court documents.

Malekzadeh also delayed shipping sneakers for up to a year in some cases, and left many orders unfulfilled without refunds or gift cards.

Zadeh Kicks had pre-order sales for more than 600,000 pairs of sneakers, worth more than $70 million, but only acquired just over 6,000 pairs, prosecutors said.

Customers owed millions more for gift cards.

Money spent on expensive cars, jewelry, watches

Malekzadeh used the pre-order money for extravagant personal purchases, including multimillion-dollar Bentley, Ferrari, Lamborghini, Porsche, and Mercedes cars; more than $3 million for Louis Vuitton bags, purses and other luxury items; a large amount of jewelry; fur articles; and millions of dollars for watches, some of which are worth more than $600,000.

Federal agents seized millions of dollars in cash that Malekzadeh acquired through the scheme, nearly 100 watches, and about $6.4 million from selling the watches and cars.

In a statement, Perini-Abbott said his client had “fully cooperated” with the federal government and the court-appointed receiver since he dissolved his business.

She said Malekzadeh’s primary goal was to minimize financial damage to customers and other interested parties.

“Even before the criminal charges were filed, Mr. Malekzadeh voluntarily handed over Zadeh Kicks and all of his assets to an escrow and provided millions of dollars of his personal assets – including cash and hundreds of items of value – to the federal government,” Perini-Abbott said in an email. “He did so knowing that these assets would serve to ensure that the parties who suffered financial harm were as whole as possible in a fair and equitable manner and to protect those parties from any single creditor ‘jumping the line’ for receive an unjust share.”

Perini-Abbott added that Malekzadeh “is not hiding his conduct”. She declined to comment further on the matter.

Attempts to contact Malekzadeh at his home in southwest Eugene were unsuccessful.

The conspiracy to commit bank fraud charge, which names both Malekzadeh and Mockerman as defendants, was related to an alleged scheme to defraud victims’ financial institutions.

According to the charging document, the couple provided false and altered bank statements and financial information about Zadeh Kicks when applying for the loan.

The couple submitted more than 15 fraudulent loan applications and received more than $15 million in loan funds, prosecutors said.

The money laundering accusation against Malekzadeh dates back to June 2021, when he allegedly transferred $790,000 from Zadeh Kicks’ bank account to his personal account to buy a $420,000 watch and a $79,000 car. dollars.

Mockerman’s attorney, Whitney Boise, said her client was cooperative and determined to minimize damage to clients.

“Ms. Mockerman has cooperated fully with the government; she has provided full access to records, answered questions and turned over assets,” Boise said. “She remains committed to doing what she can to minimize financial harm to customers and creditors of Zadeh Kicks.”

Louis Krauss covers breaking news for The Register-Guard. Contact him at [email protected] and follow him on Twitter @LouisKraussNews.


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