The grand jury also accused Avenatti of lying to the IRS about his pocketing of almost $2.4 million in taxes withheld from the paychecks of employees of Global Baristas U.S., which operated Tully's coffee stores in Washington and California.
A news conference concerning the indictment in Los Angeles is scheduled for Thursday with federal prosecutors and Internal Revenue Service officials.
But the charges handed down Thursday are only part of Avenatti's troubles.
The Los Angeles Times reported Thursday morning that charges stem from Avenatti's dealings with multiple clients, including Geoffrey Ernest Johnson, who is mentally ill and a paraplegic. If convicted, he faces up to 335 years in prison.
The Los Angeles prosecutors have accused Avenatti of misusing a client's $1.6 million settlement to pay for his own expenses as well as those for his coffee business, and with defrauding a MS bank of $4.1 million in loans by submitting false tax returns for 2011 to 2013 that inflated his income.
The indictment also indicates that because Avenatti failed to respond to the U.S. Social Security Administration's request for information about the paraplegic, the client then had his Supplemental Security Income benefits discontinued in February. "I am entitled to a FULL presumption of innocence and am confident that justice will be done once ALL of the facts are known", he added.
House approves Save the Internet Act, votes to restore net neutrality
Regardless of what happens in the Senate, however, the Trump administration sent out a clear veto threat Monday. Governor Jared Polis, a Democrat, is expected to sign the measure.
"Any claim that any monies due clients were mishandled is bogus nonsense. I look forward to the entire truth being known as opposed to a one-sided version meant to sideline me".
Stolper says Avenatti told Frank outside court that he won't get paid now that federal authorities seized his private jet.
The exact amount of Avenatti's alleged embezzlement from the five clients is unclear, because clients typically must use a portion of their settlement funds to pay their lawyers' fees and expenses. He is accused of failing to file personal tax returns since 2010 and to pay $3.2 million in payroll taxes on his coffee business, even though he withheld some portion of this money from employee paychecks.
Until last month, Avenatti had only provided $124,000 over 69 payments to Johnson, the indictment said. But when Johnson was in escrow to purchase the property, Avenatti falsely said he had not received the settlement funds, the indictment said.
Avenatti has tweeted denials of all the allegations and says he will plead not guilty.
Further, Avenatti faces two counts of bank fraud relating to filing false tax returns to obtain millions of dollars in bank loans, and four counts of bankruptcy fraud for lying about the bankrupty concerns surrounding his law firm Eagan Avenatti.
The indictment is consistent with The Daily Caller News Foundation's previous reporting on Avenatti's management of Tully's coffee chain. But Avenatti denied to the client that the total settlement had already been paid, the indictment reads.