Who Will Win the $500M Zappos Fortune?

by LegalFix
Posted: January 31, 2022
Wills, trusts, and estates

Former CEO Tony Hsieh (pronounced Shay) was well-known for transforming Zappos into a billion-dollar business, defining the standard for online shoe shopping. Held up as a pioneer of internet entrepreneurship, Hsieh earned himself a place among retail giants — and amassed a tidy fortune along the way. At the peak of his accomplishments, Hsieh even compiled his theories regarding happiness in the corporate world into a bestselling book, Delivering Happiness. However, his success story began much earlier, in his early 20s.

Tony Hsieh’s Meteoric Rise

In 1995, at the age of 22, Hsieh graduated from Harvard University with a degree in computer science. Shortly after graduating, he landed a job at Oracle Corporation but abandoned the position less than six months later to co-found LinkExchange. In 1998, he sold that company to Microsoft for $265 million, the first major milestone on his path to wealth and fame.

In 1999, the story of Tony Hsieh began to take shape. Still in his 20s, he became the CEO of Zappos, an e-commerce company that sells shoes, handbags, and eyewear. Hsieh went on to run the company for 21 years, only stepping down from his position in August of 2020. Hsieh’s personal assistant, Anthony Herbert, stated that Hsieh retired due to “mental health concerns” and a “mid-life crisis.”

Unfortunately, Hsieh’s retirement would only amount to three months. On November 27, 2020, Tony Hsieh passed away at the age of 46 due to complications that arose from smoke inhalation during a fire. Remarkably, he left behind his estate — valued at over $500 million — with no will. Given that Hsieh had no spouse or children, it is now unclear who will obtain the bulk of his estate. Legal battles are already underway between potential inheritors, who all hope to take control of the $500 million Zappos fortune.

The Death of Tony Hsieh

Well before Hsieh passed away, it became apparent that he was not mentally stable. The 46-year-old tech entrepreneur moved to a small, exclusive mountain community in Park City, Utah, where he developed a fixation with candles and fire. He stated that candles reminded him of a “simpler time” and had thousands of candles strewn across his mansion.

Hsieh also began experimenting with illicit drugs such as mushrooms, “whippets,” and ecstasy. As Hsieh’s drug use pushed him to the point of delusion, he started making many odd business deals and investments. In addition, he pushed his body to extremes through the deprivation of food, sleep, and oxygen. Soon, his weight dipped below 100 pounds. “Things were falling apart for him,” stated Philip Plastina, founder of an electronic music group that frequently performed at Hsieh’s parties.

People in Hsieh’s inner circle were reportedly aware of his extensive drug and alcohol use, which allegedly included using nitrous oxide up to 50 times a day, along with other substances.

Hsieh’s friend and well-known singer Jewel wrote him a letter stating, “I need to tell you that I don’t think you are well and in your right mind. I think you are taking too many drugs that cause you to dissociate.” She went on to say that “people you are surrounding yourself with are either ignorant or willing to be complicit in you killing yourself.”

Concern from Hsieh’s friends may have made an impact, as sources state that Hsieh was planning on attending rehab shortly before his death. Personal assistant Anthony Herbert stated that Hsieh was “distraught” over the death of his dog, but Herbert also noted that he “had never heard the victim make any suicidal statements.”

In the wake of these personal struggles, Hsieh traveled to Connecticut to meet with a former Zappos executive and alleged girlfriend named Rachael Brown. However, following an argument on November 18, Brown asked Hsieh to leave the property until his scheduled departure to Maui, Hawaii.

To give Brown her requested space, Hsieh went to a shed on the property around midnight and asked his assistant to check on him every 5 minutes. In the shed, Tony Hsieh was surrounded by candles, alcohol bottles, nitrous oxide containers, and blankets. At one point, Herbert reports coming to check on Hsieh and asking him to move a blanket away from a candle. 

Investigators turned to the security cameras to establish what happened next. According to the footage, it appears that Hsieh looked outside the shed door around 3 a.m., with smoke rising visibly behind him. He then shut the door and locked it. When flames engulfed the shed, his assistant attempted to get inside but was unable to open the door. Paramedics arrived and were able to gain access, taking Hsieh immediately to the hospital. However, he passed away nine days later from complications due to smoke inhalation.

Following such unusual circumstances, Hsieh’s death would have undoubtedly attracted media attention on its own. But soon, the manner of his passing was eclipsed by his financial legacy — at the age of 46, he had left behind his $500 million fortune without a will.

The Legal Implications of Dying Without a Will

An estimated 50 to 60% of Americans do not have a will. However, failing to establish your preferred asset allocation before death can have significant consequences.

Essentially, a will provides instructions regarding how you would prefer to have your assets and affairs handled after death. In the event that you die without a will — a situation referred to legally as “intestate” — the following will occur:

  • You will have no say over how your assets are distributed, except for those addressed in a trust or prenamed beneficiary. If you die without a will, the state will dictate how your assets are divided. Typically, the majority of the estate will be distributed to your spouse, while your children will inherit the rest. If there are no surviving family members, your estate becomes the property of the state of residence.

  • Your personal representative will be appointed by the court. When creating a will, you can designate a personal representative, referred to as an “executor.” The executor will ensure that your taxes are paid, any final bills are taken care of, and your assets are distributed as you wish. However, if there is no will, a judge will determine who controls this process.

  • Your estate will not have provisions for charity or people who are not related to you by blood. For instance, if you would like to establish a scholarship program, donate to favorite charities, or leave part of your estate to a friend, there is no way to ensure that these events happen.

The Feud Over the Zappos Fortune 

Now, at the heels of his intestate death, Tony Hsieh’s estate is entering probate, which is the process of distributing money, belongings, and properties. All told, Hsieh’s estate is said to be worth more than $500 million, and people are coming out of the woodwork to claim that Hsieh owes them millions of dollars for employment contracts, real estate development, and everything in between.

These claims are difficult to substantiate. In the later stages of Hsieh’s life, he made many deals and investments that were not properly recorded. The only proof of these deals is an array of sticky notes that covered walls in his Park City home, which were filled with information pertaining to everything from life mantras to business deals. As a result, multiple parties have submitted claims in court using the sticky notes as evidence that Hsieh owed them a certain amount of money.

For example, Hsieh’s friend and assistant, Mimi Pham, is requesting over $90 million, while his financial advisor, Tony Lee, is requesting $7.5 million. It is notable that Pham has written herself checks for hundreds of thousands of dollars over the past 17 years. Hsieh’s family members have stated that they believe Pham and Lee have taken advantage of Hsieh’s finances.

Currently, Hsieh’s brother and father are overseeing his estate and the $150 million in creditors’ claims that have been filed in the probate case. But it may take some time before the estate is finally settled—contested probate cases, particularly those of such complexity, can take more than five years to resolve.