Government wants to run eBay sneaker seller implicated in massive pot conspiracy
Published: March 13, 2013
The manufacturer’s suggested retail price for a pair of Nike Shox Turbo 3.2 SL running shoes is $120, but Krush NYC, an eBay seller based in a warehouse in Jessup, sells them for $79.99. That kind of markdown is what attracts the buyers that make Krush a profitable enterprise: It clears an average of almost $1.5 million annually on gross sales of nearly $2.6 million, according to court documents.
The nitty-gritty on Krush’s financial information was revealed in court because federal prosecutors want to make sure Krush remains valuable. Its principals—40-year-old Kerem Dayi of Gambrills, Md., and California, and 43-year-old Steven Neil Madden of Randallstown, Md.—are two of 18 defendants charged in January with operating a massive pot-dealing and money-laundering conspiracy in Maryland, New Jersey, and California since early 2010. The indictment includes a count to allow the government to take ownership of at least $10 million in allegedly ill-gotten gains, including a number of assets already seized: eight pieces of real estate, 22 bank accounts, 24 vehicles, and three businesses. Krush is one of them.
With Dayi, Madden, and several Krush employees indicted and facing maximum sentences of life imprisonment, the business is at risk of falling apart—something prosecutors want to avoid, so as to maximize its value in the event they get convictions and win forfeiture judgments. The government has a special tool to help—the U.S. Marshals Service Complex Assets Unit (CAU), which, as assistant U.S. attorney Andrea Smith describes it in court documents, “functions much like a receiver in a receivership, to operate seized businesses for the benefit of all parties pending litigation.”
In other words, Smith continued, “the government is seeking to resume a business, supervised by the Marshals, selling forfeitable merchandise so that the proceeds of the sale can keep the business running and thus, in the end, maximize the value of the property ultimately to be forfeited.”
It appears this is the first time the CAU, which was formed in 1998, has run a business on behalf of federal prosecutors in Maryland. “No one that I’ve talked to is aware of any other case like this one in Maryland,” Maryland U.S. Attorney’s Office spokesperson Marcia Murphy wrote in an email.
The CAU made headlines in 2011, after an audit turned up such shoddy record-keeping that out of 55 cases it handled between 2005 and 2010, in only eight of them could they show who purchased seized assets and for how much. The auditors reviewed CAU’s management of assets in some of the most notorious white-collar cases of the day, including Bernard Madoff’s multi-billion-dollar fraud, Scott Rothstein’s $1.2 billion Ponzi scheme, and Hassan Nemazee’s $292 million bank fraud. In addition, the CAU managed mobster James Galante’s trash-hauling companies, which were valued at about $60 million. In the Madoff case, the CAU’s “lack of transparent procedures and oversight” caused prosecutors to “lose confidence” in it.
Krush is a far sight less complex than Madoff’s sprawling fraud scheme or Galante’s trash-hauling businesses. According to court documents, Krush sells its wares—“primarily sports shoes, but the inventory also includes high end shoes, purses, jackets, and other accessories. . . on eBay, processes payments through PayPal, and ships product through the postal service to customers across the country and internationally.” It has “approximately a dozen employees” whose work includes “stocking shelves and filling orders at $10 to $14 per hour.” The CAU’s role would be “to liquidate the inventory and secure the proceeds therefrom in a bank account pending” the outcome of the criminal case, and to “reinstate the operation of the business, after which it is expected that the business will maintain itself.”
Whether Smith’s motion was granted is unclear, since the case has since been placed under seal, so its docket cannot be viewed publicly. However, before the indictment, Krush’s PayPal account was “202bigwheels,” court documents say. eBay’s website indicates this seller first started operating in 2007, but is now closed. Krush’s new account is called “salesforshoes,” which opened in February, after Smith filed her motion—which proposed that 202bigwheels could be replaced with a different account.
The case against Dayi, Madden, and the rest erupted in publicity when, in mid-January, about 250 law enforcers descended on 17 homes and businesses in Maryland, five in New Jersey, and one in California, seizing at least 30 vehicles, 60 pounds of marijuana, $300,000 in cash, and 35 firearms. Though charged for pot, court documents also allege the conspiracy was involved in dealing cocaine and pharmaceuticals. Last November and December, according to court documents, agents investigating the case watched on two occasions as large trailers delivered sizable loads of marijuana—including a 400-pound shipment—to Krush’s Jessup warehouse.
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