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WEDNESDAY, JUNE 15, 2022
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FBI investigates after Zadeh Kicks dissolves
Louis Krauss
Salem Statesman Journal | USA TODAY NETWORK
When Indiana college sophomore Andrew
Blough found the Eugene-based sneaker re-
sale company Zadeh Kicks online in 2020, he
thought it was too good to be true.
The middleman company allowed for bulk
preorders on the most prized upcoming
sneakers, and for a good price. It seemed per-
fect for the 20-year-old Blough, who runs his
own sneaker resale company.
Over time he made a significant invest-
ment, paying roughly $70,000 to Zadeh
Kicks, run by Eugene resident Michael Malek-
zadeh.
But in April 2021, Blough’s orders stopped
arriving, and he got more and more emails
about delays. Then, in late May, the news
came out that Zadeh Kicks had been closed
and placed in receivership, with Blough out
$45,000 in outstanding orders.
“It definitely stings. At first, I was in shock,
and then it kind of set in,” Blough said. “I hate
to say I saw it coming, but there were a lot of
red flags along the way.”
Zadeh Kicks LLC was formally established
by Malekzadeh in May 2013 and was a pop-
ular online option for sneakerheads — people
who collect and trade sneakers, often rare or
exclusive shoes from brands like Nike and
Adidas that run from the hundreds to the
thousands of dollars. Zadeh Kicks promised
customers the eventual delivery of valuable
shoes that weren’t yet released, often below
retail cost, which attracted other resellers
wanting to make a profit.
Malekzadeh was the only member of his
company, court documents state.
On May 19, the company requested it be
voluntarily closed through dissolution in Lane
County Circuit Court and petitioned for a
court-ordered receiver to take control of the
remaining assets.
Now, thousands of sneaker collectors and
shoe sellers worldwide who bought from Ma-
lekzadeh are scrambling to file claims against
the company with the FBI, through their
banks and through PayPal, in hopes of getting
refunded.
The FBI is investigating, according to Eu-
gene
police
spokeswoman
Melinda
McLaughlin.
A representative for the FBI said it would
not comment on active investigations.
Blough is one of more than 6,500 mem-
bers of a Zadeh Kicks relief group on the mes-
saging app Discord, where past customers are
sharing how much they lost, discussing their
next steps and theorizing about where they
think the money went.
“It’s pretty shocking. Some of the pictures
I’ve seen of people’s orders, with single orders
over six figures, it’s sickening” Blough said.
Blough and other customers say they are
suspicious this was a scam or Ponzi scheme
where Malekzadeh used presale money to ful-
fill pre-existing orders or for personal pur-
chases.
Levar Hage, a 36-year-old Arizona resi-
dent, said he found it suspicious when a pop-
ular shoe would appear to have sold out before
immediately becoming available again on the
website.
“This pair that I wanted, it kept selling out
quick, but then he kept selling them, and kept
putting it back on the site, doing it over and
over,” said Hage, who said he is owed $400 for
one pair of shoes he never received. “I was like,
‘Oh, this is strange.’”
Rise and then fall to dissolution
Malekzadeh started selling athletic shoes
on eBay, a few pairs at a time in 2009, he
shared in a contribution to a 2015 Forbes
article about how to finance a startup or small
business.
As Zadeh Kicks grew, he recounted, he
came up with a plan for not only paying off
loans, but getting cheaper financing once he
qualified for it. As the business grew, he used
$30,000 of his own money to take out a mer-
chant cash advance, which led to more and
more advances, until he’d taken 10 or 12 out
from multiple lenders, with payback terms
between three months and nine months
“They make it very convoluted to find out
what you’re paying,” Malekzadeh said in the
article. “The worst one I did, I’m pretty sure,
was $75,000 at $110,000 payback. As long as
I’m flipping my product frequently, I’ll still
make money, but I have to work my butt off to
pay all that interest.”
In July 2015, Malekzadeh told Forbes his
sales were approaching $2 million, and he
switched to new financing, a less-pricey credit
with alternative lender Dealstruck, and his
company grew from it.
The new financing, he says, gave him
breathing room. “I’ve flipped inventory a ton
of times since then,” he reported to Forbes,
“and done a lot of big deals.”
It’s not clear when those deals started to
overwhelm the business leading Malekzadeh
to ask the court for a voluntary dissolution of
the company he built.
Zadeh Kicks’ lawyer Joe Mabe, with the
Portland firm Slinde Nelson, declined to com-
ment on what led to the dissolution or how
much was owed.
“The company is in the hands of the re-
ceiver,” Mabe told The Register-Guard.
In the petition for dissolution, Mabe wrote
that Zadeh Kicks experienced exponential
growth between January 2020 and May
2022, mostly as the result of presales of shoes
that weren’t yet released.
During that time, Malekzadeh was unable
to keep up with the growth and the compa-
ny’s “internal systems and processes were in-
adequate to maintain fulfillment at these lev-
els,” Mabe wrote.
“As a result, Zadeh Kicks’ present liabilities
exceed its present assets, e.g., Zadeh Kicks is
insolvent,” the petition reads, later adding that
“this will be a massive undertaking” for the re-
ceiver.
The petition does not specify how much
Zadeh Kicks owes, other than it exceeds mil-
lions of dollars. The company stopped taking
orders April 29, the petition states. Malekza-
deh proposed California lawyer David P. Sta-
pleton to serve as a receiver, and the court or-
dered he take over the assets May 23. Staple-
ton did not return requests for comment.
Following the company’s closure, it posted
a message on its website — which is now of-
fline — informing that Stapleton had taken
over asset management, and that he would
provide updates “as they become available.” It
also directed customers who believed they are
victims to call the FBI and that no one should
try to make contact with Malekzadeh or his
family. A few days later, the website was shut
down.
Eugene police get involved
The dissolution led to numerous outcries
on social media where people alleged Zadeh
Kicks scammed its customers and posted
screenshots of their claims for reimburse-
ment, and pictures of Malekzadeh and his
house in Eugene.
There may have been more extreme reac-
tions by customers angry they lost money in
the dissolution.
Malekzadeh has requested assistance
from Eugene police “a few times” following the
dissolution to report “suspicious persons and
circumstances,” according McLaughlin. Police
call logs show officers have responded four
times to his primary warehouse in west Eu-
gene in the past two weeks, including one re-
port of criminal trespassing, two for “suspi-
cious conditions” and one request for backup
after reports of a shot fired.
McLaughlin declined to comment further
on the incidents, and whether police believe
they involved customers of Zadeh Kicks.
“The case is the FBI’s so we don’t want to
interfere with that by giving out further de-
tails,” she said.
Customers were suspicious of
company beforehand
Several who lost money told The Register-
Guard that the company’s downfall came as
shock, but also that they suspected some-
thing was fishy with how the reseller operat-
ed.
Hage, who never received the Jordan 1 Chi-
cago shoes he paid for, said this is a “huge”
financial hit to the sneaker collector commu-
nity. He was surprised by Zadeh Kicks’ col-
lapse and said he became a regular customer
after his first few purchases went smoothly.
The company also offered larger-size shoes
that fit Hage and weren’t fakes, which he said
is more common for those sizes.
Hage and Blough described Zadeh Kicks
as a hidden secret, where sneaker fanatics
and those trying to make a profit could find
the best deals, even if it meant waiting more
than a year for delivery.
“The joke was when you order from Zadeh,
you’re probably going to get them two Christ-
mases from the time that you ordered,” Hage
said. “But at the same time, everyone was like,
“No, they’re legit.’”
Sometimes a hot upcoming sneaker would
end up getting canceled and Malekzadeh
would refund buyers.
But customers said there were also red
flags, such as questions surrounding how Ma-
lekzadeh profited while selling shoes under
the retail price, and why orders often arrived
months or years late, if at all.
Blough said he paid $5,000 for a bulk order
of an upcoming shoe, but that when the shoe
was released, the company offered to buy
back his purchase — with a $8,000 gift card to
use at the Zadeh Kicks website, which he ac-
cepted. Not long after, the company was dis-
solved.
“‘I spent the gift card on his website, and I
got some shoes from those orders, but then
the website shut down,” said Blough, noting
he has gotten no response after trying to reach
the receiver Stapleton.
Looking back at the delays and activity on
the website, Blough said, he thinks there were
signs all along it could be a Ponzi scheme.
“It had those characteristics, where it was
hard to pull your money out; you have these
high percentage returns of sometimes over
100% within a year; and the long wait times,”
Blough said.
In 2020, the company received a federal
PPP loan for a little over $150,000 to go toward
payroll. The loan status is undisclosed, so it is
unclear if it was repaid.
While Blough said he will be OK financially,
he felt bad for other customers in more dire
situations. Customers in the relief group post-
ed about having to put their homes up for
foreclosure, paying for a $615,000 gift card, or
how it caused turmoil in their personal lives.
Given there’s a chain of shoe re-sale busi-
nesses that buy from each other and make
bulk pre-sale orders, Hage said, he’s interest-
ed to see what happens next and if other com-
panies will collapse as well.
“There were concerns because you hear of
other big-time resellers getting pairs earlier,”
he said. “So we’re like, ‘Who going to be the
next big person to fall now as a result of this?’”
Louis Krauss covers breaking news for The
Register-Guard. Contact him at lkrauss@reg-
isterguard.com, and follow him on Twitter
@LouisKraussNews.
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