Nike’s name has turned up in court repeatedly in the last few years, but a recent case involving the sneaker giant may be the weirdest. On April 8, a former Nike employee named Kyle Yamaguchi was sentenced after pleading guilty in a scheme to steal hundreds of rare, valuable Nike sneakers from the company and resell them, the Oregonian reports.
An indictment filed last July (pdf) in US district court in Portland, Oregon says that Yamaguchi and an accomplice, Tung Ho, swiped and sold more than 630 pairs of Nikes for a total of $679,650 between September 2012 and March 2014. The indictment says that Yamaguchi cooperated with the authorities in building a case against Ho and another man he said worked with him on the scheme, who both go on trial later this month.
Quartz has reached out to Nike and the attorneys of the men indicted. Nike has not responded to the request, and the attorneys for Tung Ho and Kyle Yamaguchi both told Quartz their clients have no comment. Ho has pleaded not guilty.
The harebrained conspiracy, which highlights just how valuable the sneaker resale market can be, sounds like something out of a crime novel, involving subterfuge, a Florida pipeline, bags of cash, and an undercover sting.
Here’s how the drama played out, according to the indictment and a detective’s affidavit, which was included in the court filings:
The whole thing started with Yamaguchi, who served as Nike’s promotional product manager for several years until he left the company in January 2012. In that role he was able to order pre-production samples called “Look See” models, as well as promotional sneakers, directly from Nike’s factories in China. These ultra-rare sneakers are highly sought after, and collectors have been known to pay up to $20,000 for a pair.
Ho replaced Yamaguchi in the position, and the two men reportedly came to an arrangement: Yamaguchi explained to Ho how he could hide the scope of promotional orders by billing them to different Nike cost centers. In July 2012 they agreed to work together to sell the rare sneakers: Ho would acquire them and Yamaguchi would funnel them to a reseller, a service for which he got a 20% cut of the sales.
A month later, Yamaguchi connected with the reseller who would become their main outlet for the stolen sneakers, a Florida man named Jason Keating (the third man indicted in the case, who has been released on pretrial conditions and will stand trial later this month). Yamaguchi would ship the sneakers from Oregon to Keating in Florida, where he would then resell them to customers. Keating would pay Yamaguchi by wire transfer or actually go to Oregon and pay in cash for larger purchases. The typical payment ranged from $5,000 to $30,000.
(In a statement, Keating’s attorney tells Quartz that Keating “is working and supporting his family. Mr. Keating was never a Nike employee. He is clearly less culpable than anyone involved in this matter.” Keating has pleaded not guilty.)
Nike’s internal security team eventually caught on and sent the police a surveillance video supposedly showing Ho in the act of smuggling sneakers off the Nike campus. On March 14, 2014, the police raided Ho’s residence, and reported finding the 1,941 sneakers and a “large sum” of cash.
Ho, who police say had put a pair of LeBron James 9 MVPs on eBay for $20,000, pointed to Yamaguchi, who in turn wore a wire at least once in a sting operation that allowed police to arrest Keating as well.
In December 2014, Yamaguchi pleaded guilty to conspiracy to transport, receive, and sell stolen goods as part of a plea deal. His sentencing hearing on April 8 got him five years’ probation and 50 hours of “voluntary”community service on account of his cooperation with the police. Ho and Keating, meanwhile, are scheduled to go on trial later this month.