60,000 Nikes, Yeezys and Adidas.sneakers for sale after $120m Ponzi scheme collapses
“It’s going to take a lot of work for them,” said Yu-Ming Wu, founder of Sneaker News.
Federal prosecutors have charged Malekzadeh, 39, with defrauding clients of more than $70 million ($100 million) and falsifying loan applications for more than $15 million in bank financing. Earlier this month, Malekzadeh pleaded not guilty to charges of wire fraud, conspiracy to commit bank fraud and money laundering. In May he disbanded Zadeh Kicks, which he had led since 2013.
“Test the market”
Representatives for his company did not respond to requests for comment on the sale. Almost all of the inventory inside the warehouse has been accounted for, according to court documents, and preliminary discussions with potential buyers or consumer resale platforms have already begun. The date of the sale is yet to be determined.
The receiver, David Stapleton, is trying to figure out how to unload the inventory. One possibility is to sell the sneakers in bulk. Another is to offload them through various resale platforms, according to court documents. Selling Malekzadeh’s personal collection first aims to “test the market”.
The alleged sneaker caper seems tailor-made for these days of meme-stock zaniness. From his warehouse in Eugene, Oregon, Malekzadeh offered to sell limited-edition Air Jordans and other brands at below-market prices before manufacturers released them. Prosecutors say he took orders — and raised money — for thousands of sneakers he didn’t have and couldn’t get, at least at prices that made sense economic.
Zadeh Kicks pocketed $70 million off the pre-sale of a single Air Jordan model, the 11 Cool Grey, prosecutors say. The total amount of money due for all presales has not yet been determined.
His warehouse is now guarded by a security guard. Experts say the cache, still wrapped and tagged, could be worth between $12 million and $20 million – at best.
Jared Goldstein, author of sneaker law, a book on the sneaker industry, said some shoes could be worth thousands on the resale market, but calculated that the majority will average between $200 and $300. The real test for the receiver will be how well they can value these sneakers on the market if they’re sold in bulk, Goldstein said, saying even $20 on 60,000 pairs can be millions of dollars.
“These people who are dealing with it, I’m sure, aren’t that sneaker savvy,” Goldstein said.
The court documents list more than 15,000 creditors on 197 pages, ranging from individuals to financial companies including PayPal, American Express and Chase Bank. It remains unclear whether the financial institutions involved will receive their money first.
One of the challenges is making sure all the shoes are authentic. Another is the vagaries of the sneaker resale market, which has exploded during the pandemic along with cryptocurrencies and stonks. Like the stock market, sneaker prices have fallen this year.
“The market is on a downtrend across the board,” said Matt Halhill, founder of Nice Kicks, a sneaker blog. “There’s no way it even comes close to covering up the casualties.”