Michael Avenatti, the attorney best known for representing porn star Stormy Daniels, was arrested Monday by federal law enforcement officials on charges stemming from two separate cases in Los Angeles and New York.
Federal prosecutors in Los Angeles say Avenatti embezzled a client’s money in order to pay his own expenses and debts as well as defrauding a bank by using fake tax returns. He faces two felony counts of wire fraud and bank fraud.
According to a criminal complaint filed by the Central District of California, Avenatti negotiated a $1.6 million settlement on behalf of his client, but gave the client a “bogus settlement agreement with a false payment date.” He then used the client’s settlement money to pay his own expenses, including putting money toward his coffee business, prosecutors say.
Avenatti is also accused of defrauding a bank in Mississippi by submitting false tax returns in 2014 to obtain $4.1 million worth of loans for his law firm and coffee business.
Meanwhile, federal prosecutors in New York say Avenatti attempted to extort $20 million out of Nike by threatening to release damaging information about the company if it did not meet his demands.
“I’ll go take ten billion dollars off your client’s market cap,” Avenatti told attorneys for Nike on March 19, according to a complaint filed by the Southern District of New York. “I’m not fucking around.”
The Wall Street Journal reported that Avenatti’s co-conspirator in the Nike extortion scheme was celebrity lawyer Mark Geragos. Geragos represented Nike endorser Colin Kaepernick in his NFL collusion case and is currently representing actor Jussie Smollett in an alleged hate crime hoax. Geragos has not been charged in this case.
Avenatti did not immediately respond to HuffPost’s request for comment.
See the Southern District of New York’s full complaint below.
Avenatti was taken into custody by the FBI in New York around 12:30 p.m. Monday, NBC News reported. He was released Monday night on $300,000 bond with his travel restricted to the New York and Los Angeles areas, according to Yahoo Sports. He’s due back in court on April 1 in California, and on April 25 for the New York charges.
“By engaging in the conduct alleged in the complaint, Avenatti was not acting as an attorney,” U.S. Attorney Geoffrey Berman said during a press conference Monday afternoon. “A suit and tie does not mask the fact that at its core this was an old-fashioned shakedown.”
Minutes before his arrest Monday, Avenatti announced shortly after noon on Twitter that he planned to hold a press conference “to disclose a major high school/college basketball scandal” perpetrated by Nike.
“The criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball,” he tweeted.
Berman said Monday that Avenatti carried out the alleged extortion scheme over the last week. Nike attorneys reported to the U.S. attorney’s office on March 19 that Avenatti had threatened to extort the company for up to $25 million.
Avenatti claimed to represent a high school basketball coach whose team had been sponsored by Nike until recently, federal prosecutors say. The coach, Avenatti allegedly claimed, had information about Nike misconduct that he would go public with if the company didn’t pay him millions.
Avenatti, in a conversation recorded by the FBI, allegedly demanded that Nike attorneys agree to pay him millions to conduct an internal investigation into the company ― or he would “wipe out” billions of dollars’ worth of Nike’s capital by going public with the accusations of misconduct.
In a tweet Tuesday morning, the embattled attorney denied that he tried to extort Nike. He did not address the bank and wire fraud charges against him in Los Angeles.
“I am anxious for people to see what really happened,” Avenatti wrote on Twitter. “We never attempted to extort Nike & when the evidence is disclosed, the public will learn the truth about Nike’s crime & coverup.”
Avenatti’s suggestions of malfeasance at Nike caused the company’s share price to drop temporarily, Bloomberg reported.
The allegations, the complaint notes, are similar to those that have plagued Adidas since 2017, when federal prosecutors indicted nearly a dozen people, including two high-ranking Adidas executives and multiple assistant basketball coaches at schools with Adidas apparel contracts, on charges of fraud related to payments made to top college basketball recruits.
Two former Adidas executives were convicted on fraud charges in October.
“Nike will not be extorted or hide information that is relevant to a government investigation,” the company said in a statement. The company said it has “been cooperating with the government’s investigation into NCAA basketball for over a year.”
Avenatti rose to national fame in recent years for representing Daniels, who has alleged she had an affair with President Donald Trump in 2006 and that he paid her to stay silent about it ahead of the 2016 election.
Earlier this month, Avenatti’s office said he was no longer representing Daniels, citing “various reasons that we cannot disclose publicly due to the attorney-client privilege.”
Daniels said Monday that she was “saddened but not shocked” by Avenatti’s arrest.
“I made the decision more than a month ago to terminate Michael’s services after discovering that he had dealt with me extremely dishonestly,” she said in a statement. “There will be more announcements to come.”
Avenatti made headlines recently for claiming to have obtained VHS tapes from the late 1990s showing R&B singer R. Kelly sexually assaulting underage girls. The musician, whose real name is Robert Kelly, has faced numerous accusations of sexual abuse, many involving underage girls, over the last couple decades. He has vehemently denied the allegations.
This article has been updated with Avenatti’s March 26 tweet and information about Avenatti’s release.