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New fraud allegations against Trump antagonist Avenatti threaten Nike trial in New York

NEW YORK (Reuters) - Celebrity lawyer Michael Avenatti's arrest on allegations he engaged in fraud and money laundering by hiding $1 million from creditors while on bail threatens the upcoming trial of the critic of U.S. President Donald Trump on charges he tried to extort Nike Inc NKE.N.

FILE PHOTO: Attorney Michael Avenatti arrives at the United States Courthouse in the Manhattan borough of New York City, U.S., October 8, 2019. REUTERS/Brendan McDermid/File Photo

Avenatti was due to appear on Wednesday in federal court in Santa Ana, California, where prosecutors are expected to seek to revoke his bail, after charging him with 36 criminal counts, including defrauding millions of dollars from clients.

Federal prosecutors in California said Avenatti received the $1 million on April 30 as part of a client settlement but concealed it from his second ex-wife and other creditors to whom he owed more than $11 million.

Avenatti is awaiting trial in three federal indictments and pleaded not guilty to all charges.

In the Nike case, Avenatti was charged in Manhattan with threatening to publicly accuse the sportswear company of improperly paying families of college basketball recruits unless it paid him up to $25 million to conduct a probe plus $1.5 million to his client, a youth basketball coach.

A Jan. 21 trial is scheduled, but “the arrest of Mr. Avenatti this close to the trial has essentially thrown the trial into chaos,” U.S. District Judge Paul Gardephe, who oversees the case, said in a telephone conference.

Another conference will occur after the bail hearing.

Matthew Podolsky, a prosecutor in the Nike case, said he would not oppose a one-week trial delay, and that Avenatti could be moved to Manhattan for the trial even if bail were revoked.

Avenatti, 48, is best known as a Trump adversary and for representing porn actress Stormy Daniels, who received hush money before the 2016 presidential election not to reveal an alleged sexual encounter with the president, which Trump denies.

Earlier Wednesday, Gardephe refused to dismiss the Nike prosecution, which Avenatti called “vindictive” and payback for his animosity toward Trump.

Gardephe found no evidence that the prosecution was brought maliciously or at Trump’s behest, noting that it was Nike that alerted prosecutors to the alleged extortion.

“Avenatti is being prosecuted for activities wholly unrelated to the political arena,” Gardephe wrote.

In the California case, Avenatti was also charged with lying to the Internal Revenue Service, committing bank fraud and falsely testifying in a bankruptcy case involving his former law firm. He faces a possible 335 years in prison.

Avenatti was also charged in Manhattan with stealing nearly $300,000 from Daniels, representing proceeds from her book contract.

Reporting by Jonathan Stempel in New York; editing by Jonathan Oatis and Cynthia Osterman