A federal judge revoked bail Wednesday for embattled attorney Michael Avenatti, siding with prosecutors who accused him of operating a scheme to evade his various creditors.

Internal Revenue Service agents arrested Avenatti about 6 p.m. Tuesday amid a State Bar hearing held to consider whether to place him on an inactive attorney list.

U.S. District Judge James Selna found there was probable cause that Avenatti was violating state and federal laws while out on bail and ordered the attorney to remain in custody and to be transported by federal marshals to New York City, where he is due to go on trial in a separate case next week.

Prosecutors alleged there was probable cause that Avenatti — who rose to prominence representing adult film actress Stormy Daniels in a dispute over a nondisclosure agreement with President Donald Trump — of illegally structuring transactions to elude detection so he could acquire a Mercedes-Benz and continue living a “lavish lifestyle.”

Avenatti’s attorneys did not necessarily dispute much of what prosecutors alleged, but rather argued it was not against the law.

Prosecutors said they suspect Avenatti could be guilty of mail fraud, wire fraud and structuring currency transaction to evade reporting requirements.

Avenatti owes former law partner Jason Frank’s firm $5 million stemming from a judgment in Los Angeles Superior Court, former client William Parrish about $2.2 million after a judgment in Santa Barbara Superior Court, his second wife Lisa Storie Avenatti about $2.5 million in spousal and child support, and the state of Washington about $1.5 million in taxes, according to prosecutors.

“Since at least May 2019, defendant has brazenly attempted to defraud and conceal his assets from these creditors,” prosecutors allege in court papers.

Avenatti was paid $1 million for a settlement he obtained for a client, who is not named in the court papers. Avenatti is accused of hiding that money from his creditors by opening a new account with Chase bank, prosecutors said.

“Then, on May 8, 2019, defendant fraudulently transferred to (ex-wife Christine Avenatti) Carlin approximately $717,000 of the $1 million payment in a further effort to defraud and conceal his assets from his creditors, including a number of the victims of the alleged criminal conduct in this case,” prosecutors allege. “Five days later, on May 13, 2019, Carlin returned $500,000 of the $717,000 to defendant, which he later deposited into a different bank account that he had opened at U.S. Bank on May 22, 2019.”

Prosecutors outlined an alleged scheme by Avenatti to have his Carlin use a portion of the money to pay $50,000 for a Mercedes that he and his personal driver “repeatedly used.”

Prosecutors also allege that the attorney “flipped cashier’s checks to himself in order to limit the amount of funds available in his U.S. Bank account on at least eight separate occasions.”

Prosecutors allege he would buy the cashier’s checks, hold them, drain his account and then redeposit them to “limit his creditors’ ability to levy his accounts and recover the debts defendant owed to his creditors.”

Avenatti is also suspected of withdrawing cash in an amount just below a reporting requirement of $10,000 while also buying a cashier’s check for the same amount to exceed the $10,000 reporting threshold, which kept bank officials from filing reports that would have alerted the government, prosecutors allege.

Avenatti attorney Dean Steward said prosecutors approached pretrial services officials “multiple times” to have his client’s bail revoked, but they refused.

“They said, `no, he’s not in violation,” Steward said. “So the government took it upon themselves to bring this.”

Steward said the effort was “nothing more than an attempt collect debts” by former law partners who have dogged Avenatti to pay a court-ordered judgment.

Steward accused Assistant U.S. Attorney Brett Sagel of misconduct for attempting to collect debt owed to the law firm, which includes former federal prosecutor Andrew Stolper. Sagel replied he cut off contact with Stolper two years ago “because of this case” and that Sagel’s co-counsel, Assistant U.S. Attorney Julian Andre, handles correspondence with the former law partners of the defendant.

Steward argued that his client consulted with a bankruptcy attorney to ensure what he was doing was legal. Steward said the financial transactions were done to “make it harder for his creditors” to collect debt from him, which he argued was not illegal.

Steward also argued that the withdrawals from the bank accounts ranged from $3,000 to $4,000, so there was no evidence he was trying to avoid the $10,000 threshold for reporting transactions.

The “plan all along” was that the Mercedes would go to his ex-wife and that she “simply loaned him that car,” Steward said.

“There’s no law he has to pay (his debts) in any particular order,” Steward said. “Why should (the former law partners) get it before his first wife or second wife?”

Steward argued that prosecutors were making a case for “debtor’s prison” for Avenatti, who he said is attempting to pay his monthly child and spousal support to his ex-wife, Lisa Storie Avenatti.

“He has fallen short on that, but that doesn’t mean he has committed mail fraud or wire fraud,” Steward said.

Sagel said prosecutors consulted with the pretrial services officials twice, but never sought revocation of the bail in either instance. When investigators learned of the alleged scheme to avoid the defendant’s debtors, they felt an obligation to bring it to Selna, Sagel said.

“We saw what we believed were violations of the law,” Sagel said.

Sagel raised questions about whether Avenatti’s ex-wife Carlin and her husband could be trusted as guarantors of the bail. After the hearing, Thom Mrozek, a spokesman for the U.S. Attorney’s Office, declined to say if prosecutors were eyeing an indictment of Carlin.

Sagel said Avenatti continued to live in an apartment that costs him $11,000 a month, kept up on a country club membership and used some of his money to buy back artwork he previously owned at an auction.

Avenatti is expected to go on trial in New York next week for allegedly attempting to extort $25 million from Nike with threats to expose alleged payments by the shoe company in the recruitment of college basketball players.

Avenatti was indicted last April for allegedly defrauding clients and failing to pay personal taxes, as well as payroll and other taxes from his ownership of a coffee shop business. Before he was indicted, Avenatti agreed in a bankruptcy proceeding to turn over property from Eagan Avenatti LLP.

Tuesday’s hearing resulted from a request by the California State Bar to prevent Avenatti from practicing law based upon the belief he poses a “threat of substantial harm to the public” if he continues to perform legal work.

At Tuesday’s hearing, the State Bar’s senior trial counsel, Eli Morgenstern, laid out a case for why Avenatti should be placed in “involuntary inactive status,” which would prohibit him from practicing law, but is separate from disbarment. The State Bar has filed a disbarment case as a separate procedure. Proceedings in the matter began last June.

The complaint against Avenatti includes allegations that he stole nearly $840,000 from former client Gregory Barela, who also testified Tuesday. In previous court filings, Avenatti’s attorney denied he misappropriated Barela’s funds. Avenatti is accused of using a doctored document to scam Barela, funneling money from a lawsuit settlement fund to his own personal use.

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