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The chief financial officer of the now defunct-online sneaker company Zadeh Kicks was sentenced Tuesday to a year and a half in prison for fraudulently securing more than $15 million in bank loans for what a prosecutor called a “massive, shoe-fueled Ponzi scheme.”
Bethany Mockerman helped the company owner, Michael Malekzadeh, apply for financing with falsified loan applications after she began a romantic relationship with him and then benefitted from the millions of dollars rolling in that he used to lavish her with luxury handbags, watches and a remodeled home, a federal prosecutor said.
“She knew the money came from Zadeh Kicks, knew that money from the company was tainted by bank fraud, but ultimately ‘she wanted a fireplace,’” Assistant U.S. Attorney William McLaren said, quoting Mockerman’s own statements to investigators.
Mockerman, 42, of Eugene, altered bank statements and fabricated financial information for the loan applications, according to McLaren.
She pleaded guilty to conspiracy to commit bank fraud.
The Eugene-based company, Zadeh Kicks, sold limited edition and collectible sneakers online. Malekzadeh accepted more than $65 million in orders for sneakers he never delivered and then $15 million through the fraudulent bank loans for a total fraud of about $80 million, according to the prosecution.
Mockerman, who earned $120,000 a year as CFO, misstated the cost of inventory, creditor information and the amount of sneaker preorders in the loan applications, according to the prosecutor.
“Ms. Mockerman informed agents that there were never any correct financial statements,” McLaren wrote in a sentencing memo. “All financial documents submitted to lenders were fraudulent.”
Defense attorney Whitney Boise asked U.S. District Judge Michael J. McShane not to give Mockerman any prison time.
Mockerman underwent significant therapy and realizes how she enabled the scheme but also that she faced “coercive” and emotional control from Malekzadeh, he said.
She “took the extraordinary step” of admitting to federal investigators everything she had done with no promises of a more lenient prosecution or sentence and has complied with all the conditions of her release pending her sentencing, Boise said.
“She doesn’t need to be deterred anymore,” he said.
McShane said the year and half prison sentence marked a drop from the sentencing guideline range for her offense that sets an average penalty of just over two years in prison. Even though this is Mockerman’s first criminal conviction, the fraud continued for at least a decade, McShane noted.
Mockerman must face some accountability for her crime, he said.
“The scale of the fraud really is staggering,” the judge said. “The proceeds all went towards you and Mr. Malekzadeh.”
Mockerman has agreed to pay with Malekzadeh at least $15.9 million in restitution. A future hearing will be held to determine the exact restitution amount.
Mockerman was ordered to turn herself into the U.S. Marshals to start her federal sentence on June 11. The judge said he would recommend to the Federal Bureau of Prisons that she be held in a minimum-security prison.
Earlier this month, McShane sentenced Malekzadeh to five years and 10 months in prison. Malekzadeh pleaded guilty to wire fraud and conspiracy to commit bank fraud.
Starting in 2019, he began advertising, selling and collecting money for sneakers before they were publicly released.
He would price the preordered shoes at or below the retail price to drive up the number of orders. Customers would pay for the sneakers via PayPal or wire transfer before the release date, even though Malekzadeh wasn’t able to buy the shoes for less than the presold price he charged.
By fall 2020, he offered refunds and gift cards to customers who didn’t receive their sneakers and sometimes offered to “buy back” the shoes at a premium. But he didn’t make good on many of those offers either, according to court records.
By April 2022, the company owed more than $65 million for undelivered sneakers to thousands of customers.