https://www.thedailybeast.com/former-client-accuses-michael-avenatti-of-operating-law-firm-like-a-ponzi-scheme

A former client of Michael Avenatti alleges the celebrity lawyer secretly pocketed his money after helping him secure a settlement, then tried to lend him back some of the funds with 10 percent interest. That client, Gregory Barela, made the allegations in a statement of claims filed with Judicial Arbitration and Mediation Services (JAMS), a private arbitration organization. Barela’s lawyer provided the claim, which is not public, to The Daily Beast.

“Avenatti was operating his law firm in a Ponzi scheme like manner, taking settlement proceeds received for clients to pay off debts, pay the other individual Defendants’ salaries and bonuses, and fund his lavish lifestyle, while telling clients that the settlement proceeds had not been received or would be received at a later date,” says the claim, which also targets two other lawyers at Avenatti’s firm.

Avenatti vehemently disputes the allegations.

“These allegations are completely fabricated, bogus and fraudulent,” he told The Daily Beast. “We have no idea where this is coming from or why someone would make up this ridiculous false story and deceive his attorneys. Until recently when we demanded to be relieved as counsel, we previously represented Mr. Barela in multiple matters and he has received 100 percent of what he is entitled to. We have never had any contact with [Gregory Barela’s wife and co-plaintiff] Talitha Barela.”

According to the statement of claims, Avenatti handled litigation with an unnamed third party for Barela, securing him a confidential settlement. In January 2018, according to Barela’s claim, the third party started paying funds into a client trust account managed by Avenatti for him to pass to Barela. But instead of doing so, Avenatti allegedly told Barela the third party never paid the settlement money. As the months passed, Barela’s suit says, he grew increasingly anxious about the money, frequently asking Avenatti when it would come through.