Nearly a month after one of the biggest names in sneaker resale was accused of orchestrating a multimillion-dollar fraud scheme, federal prosecutors are now tasked with selling millions of dollars worth of stock. exclusive.
Michael Malekzadeh, once called the Bernie Madoff of Sneakers, has been charged with wire fraud, conspiracy to commit bank fraud and money laundering August 3accused of defrauding his customers of millions of dollars by selling exclusive shoes that never arrived.
Now more than 59,780 pairs of carefully packaged shoes are in the hands of a court-appointed receiver who must sell them as soon as possible in a bid to raise money for the victims.
The first shoes sold will be 1,100 pairs from Malekzadeh’s personal collection, new and used, according to court documents seen by Bloomberg.
Experts note that even if all of the sneakers in Malekzadeh’s collection and excess inventory are sold, the amount collected is unlikely to cover what is owed to the victims.
In the tightly guarded warehouse there are 4,746 Yeezys, 4,626 Adidas shoes and 48,339 Nike shoes, a good portion of which are said to be coveted Air Jordans.
Together, they have an estimated value of between $12 million and $20 million.
Malekzadeh founded the sneaker resale company Zadeh Kicks in 2013, which over the years has become known as a place to pre-order trendy sneakers months before their official release date.
The prices for the shoes were considerably below their market value and if the pre-release sneakers never materialized, Zadeh Kicks would offer store credit to customers.
There were a number of theories as to how Malekzadeh managed to get his hands on the exclusive sneakers.
Common theories included a close connection to a Nike insider or ties to smaller retailers and boutiques, but no concrete explanation has emerged.
Despite the shoes’ unexplained origin story, the ones that arrived were completely authentic and passed third-party authentication services on StockX and GOAT.
Then the economic model collapsed. On May 19, Malekzadeh terminated his activity, requesting the voluntary dissolution of the LLC and withdrew from social networks.
In the court filing announcing the dissolution of Zadeh Kicks, the company states that the company “experienced exponential growth in business” from January 2020 to May 2022, primarily due to pre-orders, and that it was not in able to keep up with the rapid growth due to an “internal systems and processes”.
News of the breakup spread like wildfire on social media, with hundreds of Zadeh Kicks customers coming forward to share stories of losing six-figure sums as the company pulled out of the market. market.
Due to Zadeh Kicks’ unique business model, whereby buyers would pre-order shoes months in advance and receive store credit for missed orders, customers who purchased Zadeh Kicks shoes before the company dissolved are unlikely to recoup their losses.
Federal prosecutors ultimately charged Malekzadeh with defrauding clients of $70 million and falsifying loan applications for more than $15 million in bank financing, to which Malekzadeh pleaded not guilty.
But now comes the task of offloading excess inventory from the dissolved company.
David Stapleton, the court-appointed receiver, plans to sell the inventory in bulk or offload it through various resale platforms.
Malekzadeh’s personal shoe collection is meant to “test the market” on how best to sell shoes.
But the real question is whether Stapleton can accurately assess the sneakers in Malekzadeh’s inventory, said Goldstein, the author of Sneakerlaw. Bloomberg. Even a $20 discount on 60,000 pairs can add up to millions, he said.
“These people who are dealing with it, I’m sure, aren’t that sneaker savvy,” Goldstein said.
Sign up for the Makeshift Features mailing list so you don’t miss our biggest features, exclusive interviews and surveys.