Michael Avenatti Arrested In Extortion Plot Against Nike, Conspired With Smollett's Lawyer

Update 4: The SDNY has laid out its allegations of extortion against Avenatti - namely, that he tried to extort Nike - during an afternoon press conference. 

After claiming to be working on behalf of an amateur basketball team in the AAU that had recently lost a Nike contract worth some $70,000 a year, Avenatti used "illegal and extortionate threats" to try and secure millions of dollars for himself from Nike. The coach from the team told Avenatti that payments had been made by Nike to high school basketball players. Avenatti threatened to make these allegations public if the company didn't meet his demands - paying his client $1.5 million, while awarding Avenatti and a co-conspirator a multi-million dollar contract to conduct an internal investigation.

Avenatti chose the timing of his plot very carefully, approaching Nike shortly before the company was set to report its Q1 earnings, and not to mention March Madness. At one point, he threatened to take $10 billion of Nike market cap.

Lawyers for Nike contacted federal prosecutors and reported the extortion attempt after they were initially contacted by Avenatti. Prosecutors suggested recording the next call with Avenatti - a recording which produced some choice quotations from the infamous "Creepy porn lawyer."

"I'm not f---ing around with this, and I'm not continuing to play games," Avenatti was recorded as saying. "You guys know enough now to know you've got a serious problem. And it's worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn't move the needle for me. I'm just being really frank with you."

"I'll go and I'll go take $10 billion off your client's market cap. But I'm not f---ing around," he said.

When the company's lawyers balked, he said it could skip the investigation if it simply paid him $22 million.

The whole incident - which SDNY described as an "old fashioned shake down" - unfolded over a period of three days, beginning earlier this month. Avenatti was arrested in Manhattan earlier on Monday and brought to the FBI offices.

As one reporter pointed out, the funniest part of the NY Avenatti indictment is the seemingly obvious (for everyone but Avenatti) setup engineered by Nike's lawyers.

Watch the full video below:

Meanwhile, here's the far more extensive nearly 200-page complaint filed by federal prosecutors in LA that describes allegations of bank fraud.

Separate from the extortion case unfolding in New York, attorneys in California laid out a separate case covering alleged financial misdeeds attributed to Avenatti, who allegedly lied to banks and cheated clients. According to the complaint (above), Avenatti embezzled a clients' money to cover his debts and lied to a bank using faked tax returns.

For a few hours, observers were left to wonder about the identity of the unnamed co-conspirator in the New York indictment before WSJ revealed that the lawyer who demanded millions from Nike alongside Avenatti was none other than celebrity lawyer Mark Geragos, who - as it happens - is currently representing Jussie Smollett. Geragos has also represented Michael Jackson and Colin Kaepernick.

He joined Avenatti in a meeting with Nike officials in New York on March 19, according to the NY complaint.

The timing suggests that Avenatti went ahead with trying to extort Nike - probably believing that the evidence he had uncovered about the company illegally paying youth amateur athletes and their families would be a slam dunk - even as prosecutors in California closed in on his past crimes.

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Update 3: Avenatti's most famous client revealed in a statement published Monday afternoon that she was "saddened, not shocked" by news of Avenatti's indictment, adding that she fired him after discovering that he had dealt with her in an "extremely dishonest" way.

With Avenatti in cuffs, and the Russia collusion narrative finally, definitively debunked, Michael Avenatti's star turn as a CNN stalwart are fading into the distance...except for the CNN hosts who feted him at their Hamptons estates.

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Update 2: This is just getting more surreal. A second set of charges allege he embezzled a client’s money in order to pay his own expenses and debts — as well as those of his coffee business and law firm — and also defrauded a bank by using phony tax returns to obtain millions of dollars in loans.

Avenatti also allegedly defrauded a bank in Mississippi by submitting to the lender false tax returns in order to obtain three loans totaling $4.1 million for his law firm and coffee business in 2014. According to the affidavit, Avenatti obtained the loans by submitting fabricated individual income tax returns (Forms 1040) for 2011, 2012, and 2013, reporting substantial income even though he had never filed any such returns with the Internal Revenue Service.

The phony returns stated that he earned $4,562,881 in adjusted gross income in 2011, $5,423,099 in 2012, and $4,082,803 in 2013, according to the affidavit. Avenatti allegedly also claimed he paid $1.6 million in estimated tax payments to the IRS in 2012 and paid $1.25 million in 2013. In reality, Avenatti never filed personal income tax returns for 2011, 2012 and 2013 and did not make any estimated tax payments in 2012 and 2013.

Instead of the millions of dollars he claimed to have paid in taxes, Avenatti still owed the IRS $850,438 in unpaid personal income tax plus interest and penalties for the tax years 2009 and 2010, court papers state. The affidavit also alleges that, as part of his loan applications, Avenatti also submitted a fictitious partnership tax return for his law firm.

Avenatti reportedly negotiated a $1.6 million settlement on behalf of a client, then turned around and gave the client a "bogus settlement agreement" with a fake date and fake amount. He used the stolen money to pay "expenses" for his coffee business.

That office said "Avenatti misappropriated his client’s settlement money and used it to pay 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."

"When the fake March 2018 deadline passed and the client asked where the money was, Avenatti continued to conceal that the payment had already been received, court documents said," according to prosecutors.

"A lawyer has a basic duty not to steal from his client," said U.S. Attorney for Los Angeles Nick Hanna.

"Mr. Avenatti is facing serious criminal charges alleging he misappropriated client trust funds for his personal use and he defrauded a bank by submitting phony tax returns in order to obtain millions of dollars in loans."

Full complaint here.

It's been a bad few days for the #resistance.

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Update 1: Just minutes after lawyer Michael Avenatti tweeted his tease of a press conference tomorrow claiming Nike is involved in a college basketball scandal, Bloomberg reports that Avenatti was just charged by federal prosecutors in New York with attempting to extort millions of dollars out of Nike Inc. by threatening to release damaging information about the company, which did not meet his demands.

Avenatti is alleged to have told Nike that he would cancel a press conference critical of sports apparel company only if it paid an unidentified client $1.5 million, and hired him and another California lawyer to conduct an internal investigation for $15 million to $25 million.

Avenatti is accused of wire fraud and bank fraud. He was arrested Monday, prosecutors said.

CNN's Erica Orden tweeted the details:

" SDNY is charging Michael Avenatti for "attempting to extract more than $20M in payments from a publicly traded company by threatening to use his ability to garner publicity to inflict substantial financial & reputational harm on the company if his demands were not met.""

According to the complaint filed in federal court, Avenatti told Nike attorneys by phone last week if his demands were not met, "I'll go take ten billion dollars off your client's market cap ... I'm not f*cking around."

"I'm not fucking around with this, and I'm not continuing to play games. . . . You guys know enough now to know you've got a serious problem. And it's worth more in exposure to me to just blow the lid on this thing. A few million dollars doesn't move the needle for me. I'm just being really frank with you. So if that's what, if that's what's being contemplated, then let's just say it was good to meet you, and we're done. And I'll proceed with my press conference tomorrow . . . .

I'm not fucking around with this thing anymore. So if you guys think that you know, we're gonna negotiate a million five, and you're gonna hire us to do an internal investigation, but it's gonna be capped at 3 or 5 or 7 million dollars, like let's just be done. And I'll go and I'll go take ten billion dollars off your client's market cap. But I'm not fucking around."

And Nike shares are rebounding...

SDNY is having a press conference on the Avenatti charges at 2:30pm.

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As March Madness hits its stride, former Stormy Daniels' lawyer Michael Avenatti has found another outlet for his unique legal capabilities. In a tweet, Avenatti warned:

"Tmrw at 11 am ET, we will be holding a press conference to disclose a major high school/college basketball scandal perpetrated by @Nike that we have uncovered. This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball."

The reaction was instant with NKE shares falling to their lowest since early February...

This news comes after Nike shares have been sliding recently following weak domestic orders.

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