Los Angeles attorney Michael Avenatti was arrested Monday on federal charges of embezzling money from a client, defrauding a bank and attempting to extort sports-gear giant Nike in separate criminal cases filed in New York and Santa Ana.

Avenatti’s arrest in Manhattan came just hours after a meeting with Nike lawyers that federal prosecutors recorded as part of a sting operation to capture him trying to extort millions from the company, according to Geoffrey S. Berman, the U.S. attorney for the Southern District of New York.

In a tweet sent shortly before he was arrested, Avenatti had threatened to go public with claims that Nike officials were paying the families of top high school basketball players.

“A suit and tie does not mask the fact that, at its core, this was an old-fashioned shakedown,” Berman said during a news conference in Manhattan on Monday afternoon.

Celebrity attorney Mark Geragos of Los Angeles was an alleged co-conspirator in the Nike scheme, the Associated Press reported.

If convicted on all counts, Avenatti would face a maximum penalty of 97 years in prison, according to federal prosecutors.


The federal charges mark a dramatic fall for an obscure California plaintiff’s lawyer who vaulted to fame just a year ago as the pugnacious attorney for porn actress Stormy Daniels in her lawsuit against President Trump over their alleged affair.

In Southern California, federal prosecutors accused Avenatti of misusing $1.6 million in funds earmarked for a client’s settlement to cover “expenses for his coffee business, Global Baristas US LLC, which operated Tully’s Coffee stores in California and Washington state, as well as for his own expenses,” the statement read.

Avenatti had owned the coffee business for several years after his investment firm bought the bankrupt company for $9.15 million at auction in 2013. But as the Tully’s chain spiraled deeper into financial troubles and halted operations in early 2018, Avenatti has tried to distance himself from the failed business and its fallout.

Dozens of landlords, vendors and other creditors have since won judgments for unpaid rents, goods and services against Tully’s parent company, Global Baristas US. Four of the creditors who were collectively owed more than $200,000 also filed a petition in federal bankruptcy court in Seattle last October, seeking to force Global Baristas into bankruptcy.

Amid the turmoil, ownership of the dormant Tully’s chain has been shrouded in a tangle of shell companies with ties to Avenatti. Still, he repeatedly has disputed to The Seattle Times that he still owns the company and refused to identify its purported new owners.

In January, the state of Washington filed a lien against Avenatti for unpaid Tully’s employment taxes and related penalties totaling $1.5 million. That debt remains outstanding, a spokesperson for the state’s Department of Revenue confirmed on Monday.


Avenatti, 48, is separately accused of fraudulently obtaining more than $4 million in loans from a Mississippi bank in 2014 by submitting false tax returns that showed he had raked in millions in profits from 2011-13, according to a criminal complaint filed in Los Angeles. In reality, Avenatti had not submitted a personal tax return with the Internal Revenue Service in any of those years, according to the filing.

During a news conference in downtown L.A., U.S. Atty. Nick Hanna noted that Avenatti’s alleged actions stood in stark contrast to his description on his preferred social media platform of Twitter: “Attorney, Advocate, Fighter for Good.”

“The allegations in this case describe something different: A corrupt lawyer who instead fights for his own selfish interests by misappropriating close to $1 million that rightfully belonged to one of his clients,” Hanna said.

The New York complaint accused Avenatti of “attempting to extract more than $20 million” from Nike regarding alleged evidence brought by an AAU basketball coach in California that claimed Nike officials were paying families of high school prospects. Avenatti threatened to hold a news conference if Nike didn’t pay the client and hire Avenatti to conduct an internal investigation of the company, court records show.

After an initial meeting on March 19, federal investigators began monitoring all contacts between Avenatti and the company, Berman said. Federal investigators recorded a call on Friday, during which Avenatii threatened Nike that he could take $10 billion off the company’s market cap by holding the news conference if he wasn’t paid.

“You guys know enough now to know you’ve got a serious problem,” Avenatti said during the recording, according to the complaint.

Avenatti and Nike had what Berman termed a “final meeting” on Monday, during which the company “would either cede to Avenatti’s demands or suffer the consequences.” Berman said Avenatti was going to attempt to link the company to a wider federal investigation into corruption and the illegal payment of college basketball players, the timing of which could be problematic for Nike in the midst of the NCAA men’s and women’s basketball tournaments.

Just before his arrest Monday morning, Avenatti tweeted he’d be holding the news conference about Nike, alleging criminal conduct in college basketball in Los Angeles, on Tuesday morning.

In court documents filed in Southern California, federal prosecutors detailed a years-long shell game involving Avenatti that saw the flashy litigator repeatedly shuffling around cash to both avoid federal scrutiny of his coffee company and keep the business operating.

In December 2017, Avenatti met with an unidentified client to discuss the disbursement of roughly $1.9 million in payouts from a settlement. $1.6 million was supposed to be issued to the client in March 2018, followed by supplemental payments of $100,000 each year. Instead, Avenatti is accused of using the money to cover costs at Global Baristas.

From 2015-17, Avenatti allegedly took steps to “obstruct an IRS collection action” related to the coffee company’s failure to pay more than $3 million in payroll taxes, according to an application for a search warrant filed last month. Avenatti allegedly instructed “employees to deposit over $800,000 in cash from Tully’s stores … into a bank account associated with a separate entity to avoid liens and levies by the IRS,” court documents show.

Several former employees of the coffee company cooperated with the federal investigation, telling prosecutors that “Avenatti was responsible for all of Global Baristas’ significant financial and business decisions, including the decision not to pay the payroll and trust fund taxes” the coffee company owed to the IRS, according to court documents.


Avenatti became a foe of President Trump while representing porn actress Stormy Daniels in her public war with the president.

Daniels, who is no longer a client of Avenatti’s, said Monday morning she was “saddened but not shocked” by news of the criminal charges.

“I made the decision more than a month ago to terminate Michael’s services after discovering he had dealt with me extremely dishonestly, and there will be more announcements to come,” Daniels said in a tweet.

Earlier this month, his firm, Eagan Avenatti, filed for federal bankruptcy protection. It is the second time in two years the firm has sought court protection from its creditors.

The move comes three weeks after Jason Frank, a former lawyer at the firm, filed court papers accusing Avenatti of hiding millions of dollars from the court that oversaw its previous bankruptcy. A judge quickly dismissed the new bankruptcy petition and ordered Avenatti to testify on whether it was filed in bad faith to dodge creditors, as Frank alleged.

Avenatti has denied any wrongdoing.

Monday’s news marks Avenatti’s latest run-in with law enforcement, coming just months after his ex-girlfriend lobbed domestic violence allegations at him in Los Angeles. Prosecutors ultimately declined to charge him with a felony in late 2018, and the city attorney’s office decided to settle the matter through an informal hearing.

The arrest announced Monday marked a precipitous fall, even by today’s whirlwind standards. Eight months ago, Avenatti was exploring a run for the 2020 presidential nomination, drawing large crowds and favorable reviews from Trump-loathing partisans.


“I believe we cannot be the party of turning the other cheek,” Avenatti told audiences from California to New Hampshire, differing with those — including, most prominently, former First Lady Michelle Obama — who counseled grace in the face of enmity. “I say when they go low, we hit harder.”

By December, however, Avenatti’s presidential exertions had run their course, as some of the novelty wore off and other more credible candidates began ramping up their efforts. He issued a statement taking himself out of the running and citing family obligations as the reason.

Includes material from Seattle Times staff reporter Lewis Kamb.