The founder of a prominent sneaker reselling platform has been handed a significant prison sentence for orchestrating a massive fraud that collapsed his business and left customers and banks facing losses totalling $80 million.
Founder Sentenced to Nearly Six Years in Prison
Michael Malekzadeh, the 42-year-old founder of Zadeh Kicks, was sentenced on Tuesday in a federal court in Eugene, Oregon, to 70 months behind bars. The court also ordered him to forfeit assets worth more than $15 million. This sentencing follows his guilty plea last year to charges of wire fraud and bank fraud, as confirmed by federal prosecutors.
The case marks a dramatic fall from grace for Malekzadeh, who capitalised on the explosive growth of the sneaker resale market during the 2020 pandemic. He built Zadeh Kicks, founded in 2013, into a major player by offering highly sought-after shoes at competitive prices, often taking pre-orders before the official manufacturer release.
The Mechanics of an $80 Million Fraud
According to the US Attorney’s Office in Oregon, the scheme was built on a foundation of false promises. Malekzadeh knowingly advertised, sold, and collected payments for pre-orders despite being fully aware he could not fulfil all the orders placed. Court records reveal the staggering scale of the deception: he owed customers over $65 million for unfulfilled orders and separately defrauded financial institutions of $15 million in loans.
Instead of using the funds to secure inventory, prosecutors stated that Malekzadeh financed an extravagant lifestyle. During the investigation, federal agents seized a trove of luxury items, including high-end watches, jewellery, and hundreds of designer handbags. The government has since raised $7.5 million by selling his Eugene residence, luxury watches, and a collection of cars from brands like Bentley, Ferrari, Lamborghini, and Porsche.
Restitution and Aftermath of the Scheme
As part of a plea agreement, Malekzadeh and the company’s Chief Financial Officer, Bethany Mockerman, have agreed to pay full restitution to their victims. A restitution hearing has been scheduled for March 31 to determine the final details. In a parallel civil action, Zadeh Kicks and its entire inventory of sneakers were placed under the control of a court-appointed receiver tasked with liquidating the remaining assets.
The sentencing brings a close to a case that sent shockwaves through the global sneaker resale community, highlighting the risks in a largely unregulated secondary market that saw record valuations. The case is officially listed as US v. Malekzadeh, 22-cr-262, in the US District Court for the District of Oregon in Eugene.
A lawyer representing Michael Malekzadeh did not immediately provide a comment following the sentencing announcement.
