"Money generated from one set of crimes was used to further other crimes, typically in the form of payments created to string along victims so as to prevent Mr. Avenatti's financial house of cards from collapsing", U.S. Attorney Nicola Hanna in Los Angeles said Thursday at a press conference. Cohen pleaded guilty and is set to report to prison next month, and Avenatti and Daniels have parted ways.
"I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me", Avenatti, who is free on a $300,000 bond, wrote on Twitter on Thursday.
Michael Avenatti, who is best known for representing adult film actress Stormy Daniels in her suit against President Donald Trump, has been indicted on 36 federal charges in California related to his legal practice.
Avenatti concealed the settlement from the client, instead giving the man periodic advances of $1,900 and paying the rent in his assisted living facility, the indictment said.
Ryan L. Korner, the acting special agent in charge with the IRS's criminal investigation in LA said the agency's investigation of Avenatti "details a man who allegedly failed to meet his obligations to the government, stole from his clients, and used his ill-gotten gains to support his racing team, the ownership of Tully's coffee shops, and a private jet".
Hanna said the Avenatti case "has nothing to do with anything political or with anything else".
"Money generated from one set of crimes appears in other sets - typically in the form of payments to lull victims and to prevent Mr. Avenatti's financial house of cards from collapsing", Hanna said in a statement.
"According to court papers, Avenatti negotiated in January a $1.6 million settlement on behalf of an unidentified client, but prosecutors say he gave that client a bogus settlement agreement with a false payment date, concealing what he had done".
The allegations involving Avenatti's disabled former client add an element of depravity to the criminal case. In one example in the indictment, Avenatti answered "no" under oath during the proceeding when asked if his firm received any fees from the Super Bowl NFL litigation.
In November, when the Social Security Administration requested information to determine if Johnson should continue to receive disability benefits, Avenatti said he would respond, but didn't because he knew it could lead to the discovery of his embezzlement, the indictment said. Avenatti also offered to accept a $22.5 million payment for his silence, prosecutors said.
Following the announcement, Avenatti tweeted that he remains "confident that justice will be done".