Image via Retail Store
One of the biggest names in the sneaker resale world pulled the plug on his business last week and seemingly scrubbed himself from social media yesterday, leaving customers with outstanding orders said to exceed millions of dollars in total.
Michael Malekzadeh, owner of Zadeh Kicks LLC, filed to voluntarily dissolve the company on May 19 in the circuit court of Lane county in Oregon, citing its rapid growth as rendering him unable to maintain the business. A message posted to its website yesterday afternoon states that a court-appointed receiver, David P. Stapleton, has taken over handling of the LLC’s assets.
The news spread quickly on social media, with hundreds of Zadeh Kicks customers coming forward to share their experiences—a small amount positive, but the majority of them horror tales of amounts as high as six figures tied up in the LLC’s dissolution. Because Zadeh Kicks operated primarily by offering preorders, buyers would pay months in advance for the product, meaning there are still an untold number of unfulfilled orders.
While much of the talk around the case hinges on speculation, these are the facts we know thus far.
Zadeh Kicks was established in 2013 as a sneaker resale company. Over the years, it became known for offering preorders for hyped sneakers far in advance of their official release date. The price points for the sneakers were often considerably lower than their expected market values, creating an enticing model for both resellers looking to stock up on product for lower-than-normal and average customers who wanted to avoid paying the high-end value.
When reports and rumors of new sneaker releases would leak, Zadeh Kicks would offer them for preorder almost instantaneously. This meant that there were sometimes cases where the shoes would never materialize as a retail release (e.g. Futura x Off-White x Nike Dunk Lows) or would be exclusively offered from one source (e.g. Fragment Design x Travis Scott x Air Jordan 1 Highs on SNKRS). In these cases, Zadeh Kicks would be unable to provide the sneakers and would instead offer buyers store credit or heavily taxed refunds, terms that were clearly stated on the website.
After preordering, buyers would usually receive their orders between six to 10 weeks after the official release date.
A peruse of social media presents a number of theories as to how Zadeh Kicks sourced his footwear, although no one seems to have a concrete explanation. Some of the more common unfounded theories include a close connection at a brand like Nike and/or ties with smaller retailers and boutiques.
One of the elements that made Zadeh Kicks so appealing to flippers and wearers alike was that despite their “low” ticket price, all signs pointed to the shoes being real. Dedicated subreddits and NikeTalk threads are filled with testimonials of Zadeh Kicks purchases passing authentication services like StockX and GOAT as well as brick-and-mortar resale stores.
While we’re unable to pinpoint the source of Zadeh Kicks’ product, there are no known examples of the shoes coming up inauthentic.
What Happened to Zadeh Kicks?
On May 19, Zadeh Kicks petitioned to voluntarily dissolve the LLC. A filing states that from around January 2020 to May 2022, the company “experienced exponential growth in business” primarily due to preorders. It says Zadeh Kicks was unable to keep up with the rapid growth due to inadequate “internal systems and processes.”
Because of the unmanageable growth, Zadeh Kicks is said to be unable to pay its debts owed. Preliminary estimates show the businesses’ liabilities are greater than its assets by more than millions of dollars.
As a result of the LLC’s dissolution, Zadeh Kicks requested the court to appoint a receiver who will now be in charge of managing the assets and paying back the company’s creditors.
“Dissolution of Zadeh Kicks will be complex and the company does not have the resources or capabilities to administer and manage all of the potential claims from creditors and third parties,” the filing reads.
David P. Stapleton of the Los Angeles Stapleton Group fiduciary has been appointed as the receiver.
It’s worth mentioning that this is not a bankruptcy filing as some social media posts have suggested. Instead, it is a voluntary dissolution of the LLC, something that is often achievable without judicial action, although this is a unique case.
“Here, since the claims against the entity appear to be far greater than the assets, it is prudent to have the court oversee the process,” Portland bankruptcy attorney Michael O’Brien tells Complex.
The filing states that on or around April 29, Zadeh Kicks stopped taking new orders.
Zadeh Kicks’ personal accounts on social media appear to have been deleted along with years’ worth of posts on his Instagram business account. This “disappearance” has no doubt factored in to buyer’s frustration and speculation around the situation.
What Happens Next?
The court-appointed receiver, David P. Stapleton, is now in charge of addressing claims against the business. Attorney Michael O’Brien tells Complex that under Oregon law, a receiver must file updates with the court within 60 days and every following two months.
A number of Zadeh Kicks customers are already sharing stories of chargebacks and filed claims to varying degrees of success. The most common thread is that buyers who made purchases recently have been able to get refunds or preliminary credits.
Those with longer outstanding orders that surpass PayPal’s 180-day claim window, or those that paid with a debit card that does not have the buyer protection of a credit card, may face more of a challenge getting a resolution. Another element at play is the fact that Zadeh Kicks often refunded buyers with store credit/gift cards, meaning that money could ultimately go unaccounted for.
“Adding up all my investments, I have a little over $100K tied up, but if you include the market value of the shoes, open orders, gift cards, all of that, it’s a little over $200K,” an anonymous customer tells Complex. “So far all my chargebacks with PayPal and credit card companies are pending, but I’m feeling optimistic. Most of them have given temporary credits while the investigation happens, and I’m hearing they are getting flooded with cases related to Zadeh.”
Image via Zadeh Kicks
Another update was emailed to Zadeh Kicks subscribers on the evening of May 25. It states the FBI is now involved in a criminal investigation of the business in cooperation with the receiver (Stapleton). It also mentions the receiver has been inundated with calls and emails and will be establishing a dedicated phone line for the case by the end of the week. According to the update, the resolution process will be a lengthy one. Inquiries are directed to zadehkicks@stapletoninc.com, while victims are advised to contact the FBI.