Turns out this popular sneaker reseller was allegedly running a massive Ponzi scheme
The sneaker retailer is now facing massive legal trouble.
Shoes are supposed to be for fun-sies, but the world of underground sneaker buying is vast and intense. Sneakerheads seek out rare and limited edition kicks, and the retailers who sell them rake in massive amounts of cash peddling the wares, even if they’re questionably sourced. At the end of the day, it seems that no one dealing in the sneaker underbelly really cares how a seller comes by the shoes, as long as they’re real.
Queue Zedah Kicks, an infamous sneaker slinger who became popular for selling unattainable editions for well below market value. It seemed too good to be true: unreleased sneakers for less than they would sell from Nike, before Nike even released them. And it turns out that any skepticism was well-founded — after a decade of success, Zedah Kicks is being investigated as a Ponzi scheme.
Bloomberg reports that Michael Malekzadeh is being charged by federal authorities with wire fraud, conspiracy to commit bank fraud, and money laundering. If he’s found guilty, he could face up to 30 years in prison. Malekzadeh plans to plead not guilty with his attorney, Joanna Perini-Abbott saying, “Mr. Malekzadeh is not hiding from his conduct. He has consistently taken full responsibility for his actions and will continue to do so.”
Part of how Zadeh Kicks got so big is that the trickle-down economics of sneaker buying runs deep. Buyers aren’t just looking to find their dream sneaker; they’re often looking to re-sell, while sometimes placing orders in the hundreds of units. And oftentimes, Malekzadeh — who worked solely with his fiancée, who served as chief financial officer and is also being charged — delivered. It wasn’t that none of the shoe orders were ever fulfilled, it’s just that a lot of them weren’t. That’s where Malekzadeh started to get into dicey territory, offering upset customers who never got their merchandise buybacks which sometimes worked in their favor, or worthless store credit and gift cards.
Ultimately, Malekzadeh was undone by one shoe in particular, the Nike Air Jordan 11 Cool Grey. Zadeh Kicks sold 600,000 pairs of the unreleased shoe, but only had 6,000 pairs in its Oregon warehouse. While customers went unhappy, Zadeh Kicks netted $70 million in undelivered sneaker money — cash spent on Bentleys, Ferraris and Lamborghinis according to court documents. Some $3 million alone was spent on Louis Vuitton swag.
Meanwhile, some customers are out of up to hundreds of thousands of dollars in unfulfilled sneaker purchases. Some are trying to get their money back through their credit card companies, while those who used wire transfers are likely out of luck. Some angry sneakerheads even gathered at the Zadeh Kicks warehouse, which is still holding thousands of shoes, with a gunshot reportedly having been fired and police needing to be called. Zadeh Kicks has since officially dissolved its business, and Michael Malekzadeh’s fate hangs in the balance. In the meantime, hungry sneaker buyers will have to turn elsewhere to get their fix.