QuickTake:

U.S. Attorney Scott Bradford said Michael Malekzadeh accepted a large number of preorders for limited edition and collectible shoes when he had no way to deliver on such a large quantity of orders. Malekzadeh used the money from customers to pay for a “lavish lifestyle,” Bradford said.

A 42-year-old Eugene man who failed to fulfill $65 million in online sneaker orders was sentenced to more than five years in prison for his role in the scheme, the Oregon U.S. attorney’s office announced Tuesday, Jan. 6.

Michael Malekzadeh lived a “lavish lifestyle” by collecting money upfront for preorders of limited edition and collectible sneakers, Oregon’s U.S. Attorney Scott Bradford said in a statement.

His company, the now-defunct Zadeh Kicks LLC, as early as 2020 began offering preorders before the release dates for the shoes and, by April 2022, owed customers $65 million in undelivered sneakers, prosecutors said.

Prosecutors in 2023 gave an example of how the fraud took place, alleging the company accepted preorder sales for 600,000 pairs of Nike Air Jordan 11 “Cool Grey” shoes, but had no means to acquire such a large number of sneakers. Prosecutors said Malekzadeh ultimately acquired just over 6,000 pairs of the shoes, leaving the rest of his customers with unfulfilled orders or partial refunds and company gift cards.

Federal authorities have seized almost $7.5 million from the sale of Malekzadeh’s home in Eugene and also assets such as watches and luxury cars.

In a court filing, prosecutors said Malekzadeh spent $3 million on more than 100 luxury bags and an estimated $5 million on 80 watches, 42 pieces of fine jewelry, fur jackets and other luxury clothing. He bought a new house and “filled its driveway with a Lamborghini, a Porsche, a Rolls Royce, and a $600,000.00 McLaren,” prosecutors said, going on to note the effect of the scheme on victims.

“Thousands of collectors, investors, and working people who simply wanted cool shoes lost tens of millions of dollars because one man wanted fancy cars, shiny watches, and a duck-shaped purse from Louis Vuitton,” prosecutors said.

Malekzadeh also cheated banks by falsifying financial information on more than 15 bank loan applications, according to the Oregon U.S. attorney’s office.

He was sentenced in U.S. District Court to 70 months in prison followed by five years of supervised release. He’s also been ordered to forfeit more than $15 million in assets, and also must pay restitution.

Zadeh Kicks LLC began in 2013. The FBI, the IRS Criminal Investigation Unit, and Homeland Security Investigations, along with help from the Oregon Intellectual Property Task Force, investigated the fraud.

In March, Malekzadeh pleaded guilty to wire fraud and conspiracy to commit bank fraud. A co-conspirator, the company’s former Chief Financial Officer Bethany Mockerman, pleaded guilty to conspiring to commit bank fraud. Mockerman has a sentencing hearing set for Jan. 27.

Malekzadeh and Mockerman have agreed to pay restitution, according to the Oregon U.S. attorney’s office, and a restitution hearing is set for March 31.