According to the Wall Street Journal, Smollett's attorney, Mark Geragos, may have been Avenatti's co-conspirator in the alleged attempted extortion of Nike. He allegedly attempted to extort Nike. "They are acting as criminals", Berman said.
Avenatti is facing bank fraud charges in California over $4.1 million in loans secured in 2014 from The Peoples Bank.
Prosecutors in NY and Los Angeles are scheduled to hold press conferences later on Monday.
Mr Avenatti told Nike that he would go public unless it paid his client $1.5 million and hired him to conduct an internal investigation for between $15 million and $25 million, according to the complaint.
In their own two-count felony complaint, prosecutors in Los Angeles detailed what they said was Avenatti's plot to defraud a MS bank using falsified tax information "to obtain millions of dollars in loans".
"I'll go and I'll go take $10 billion off your client's market cap".
Trump has acknowledged the payment to Daniels but denies the underlying allegations about a sexual relationship.
"And I'm not continuing to play games", he added.
At odds with Avenatti's claim to be fighting for the most vulnerable, Hanna said a two-year probe conducted by his office paints a picture of "a corrupt lawyer who instead fights for his own selfish interests by misappropriating close to a million dollars that rightfully belong to one of his clients".
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Minutes after the news broke, the Justice Department announced charges against Avenatti in a separate federal case from California.
After a federal judge dismissed Daniels' lawsuit against the president and his former lawyer Michael Cohen seeking to void the non-disclosure agreement blocking her from discussing her alleged sexual relationship with Trump, Avenatti said on March 12 that he had chose to terminate the relationship.
The allegations "paint an ugly picture of lawless conduct and greed", said Nick Hanna, the USA attorney in Los Angeles.
It'd be a real shame if something happened to it. Attorney Michael Avenatti has been arrested and is being charged with extortion by the US Attorney for the Southern District of NY.
Avenatti was not immediately available for a comment.
Avenatti is also accused of submitting phony, inflated tax returns to obtain loans for his law firm and coffee business from the Peoples Bank in MS in 2014.
The news came less than an hour after Avenatti tweeted his intentions to detail "a major high school/college basketball scandal" involving the sports company in a press conference Tuesday.
Avenatti also alleged that Cohen had been reimbursed by a powerful Russian for the payment to Daniels - which became part of revelations about Cohen's de facto lobbying business, in which he sought to sell access to Trump during the president's first year in office.