PORTLAND, Ore. (KOIN) — A Eugene man and woman running a business that posed as a limited edition shoe seller have been charged with defrauding customers and banks out of a combined $85 million, the U.S. Attorney in Oregon said.
According to prosecutors, former owner of Zadeh Kicks LLC, 39-year-old Michael Malekzadeh, and the company’s chief financial officer, 39-year-old Bethany Mockerman, perpetuated a scheme that left online orders for the sneakers unfulfilled and scammed financial institutions out of millions in loans.
Malekzadeh started the company in 2013 when he bought limited edition and collectible sneakers to resell online, court documents said. But in January 2020, prosecutors said Zadeh Kicks started offering preorders for the shoes before their official release dates.
The preordering allowed Malekzadeh to collect money first before the company would send out the shoes — and justice officials said he advertised, sold and raked in the payments knowing he couldn’t fulfill all the orders.
Prosecutors said Zadeh Kicks began selling preorders of Nike Air Jordan 11 Cool Grey sneakers in 2011 and the advance orders topped over 600,000, amounting to more than $70 million in Malekzadeh’s pocket.
“Malekzadeh had no way of acquiring the quantity of sneakers needed to fill the preorders received,” U.S. Justice Department officials said in a press release Wednesday. “In fact, he was only able to acquire just over 6,000 pairs. Customers were either left with unfulfilled orders or they received a combination refund of cash and Zadeh Kicks gift cards.”
By April 2022, he owed customers more than $70 million in shoes that never got delivered and an unknown amount of money held by customers in “worthless” company gift cards, the US Attorney’s office said.
Officials said Mockerman conspired with him and gave falsified financial documents and doctored bank statements to numerous institutions so they could secure loans. More than 15 applications later, officials said Mockerman and Malekzadeh received more than $15 million in loans.
Federal agents have already seized millions in cash and luxury goods from Malekzadeh — including hundreds of handbags and nearly 100 watches, some valued at over $400,000 — that they say he bought with the proceeds of his scheme.
The government said it recovered $6.4 million in cash, allegedly from Malekzadeh selling watches and high-end cars — Bentleys, Ferraris, Lamborghinis, Porsche and more.
Both Malekzadeh and Mockerman are cooperating with the federal investigation, officials said. They made their first appearances in court on Wednesday.
Malekzadeh faces wire fraud, conspiracy to commit bank fraud and money laundering charges. Mockerman has been charged with conspiracy to commit bank fraud.
The FBI asked anyone who has been defrauded by Zadeh Kicks to contact the bureau at FBI.gov/ZadehKicks.