The indictment alleges the Los Angeles lawyer stole millions of dollars from five clients and used shell companies and bank accounts to cover his theft.
"Authorities charge that Avenatti threatened to hold a news conference on the eve of the NCAA college basketball tournament to reveal damaging allegations against Nike unless it paid his client $1.5 million and agreed to hire Avenatti and another lawyer for $15 million to $25 million to conduct an "internal investigation" into the purported allegations".
Avenatti is accused of four different crimes: wire fraud, tax fraud, bank fraud, and bankruptcy fraud.
Avenatti faces 19 tax-related charges. One of his businesses, Global Baristas US LLC, failed to file employment tax returns and didn't pay $3.2 million in federal payroll taxes, which had been withheld from employee paychecks. He is accused of obstructing IRS efforts to collect the taxes and of lying to an IRS revenue officer.
The 48-year-old lawyer, a Los Angeles resident, said he planned to fight the charges and plead not guilty.
If convicted on all 36 counts, Avenatti faces a maximum 335 years in prison.
Avenatti, who was released on $300,000 bond, maintained his innocence in a Thursday tweet.
A 36-count indictment returned late Wednesday in U.S. District Court in Santa Ana, California, offered the most damning and detailed account to date of Avenatti's apparent fall from grace a year after he seized the spotlight while crusading for porn actress Stormy Daniels in her legal battles against President Donald Trump.
In fact, the indictment says, Avenatti "well knew" that the firm had received almost $1.4 million on May 17, 2017. Instead, according to the indictment, Avenatti gave his client periodic "advances" of no more than $1,900 and paid the rent for his assisted living facility.
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Attorney Michael Avenatti has refused to testify in a court case involving money he owes a former legal partner.
"As it turns out, within months of receiving the settlement proceeds in 2015, Mr. Avenatti had drained the entire $4 million payment from his trust account, using significant portions of these funds to finance his coffee business, his auto-racing enterprise and his own personal lifestyle", Hanna said Thursday.
In New York, Avenatti said last month that the case was pushed by Nike in an attempt to distract attention from what he called its crimes.
Until last month, Avenatti had only provided $124,000 over 69 payments to Johnson, the indictment said.
Avenatti gained prominence previous year when he began representing Daniels in a defamation lawsuit against Trump.
Avenatti responded on Twitter this morning, saying that he's made a lot of "powerful" enemies over two decades.
Avenatti was indicted late Wednesday on the charges following his arrest in NY last month for allegedly trying to shake down Nike for up to $25 million.
Johnson, who is now destitute, only realized after Avenatti's arrest the following week that he had been a victim of fraud, said attorney Joshua Robbins, who now represents him.