Nike Inc. shares fell sharply and then recovered most of their losses in afternoon trade Monday, after a drama-filled afternoon during which lawyer Michael Avenatti said he would unveil a major scandal involving the sporting-goods giant — and was promptly arrested.

Avenatti sent a tweet saying that said he would hold a press conference on Tuesday to disclose a “major high school/college basketball scandal” involving Nike NKE, +8.76% . Avenatti, who came to fame as the attorney for adult entertainment star Stormy Daniels in her litigation against President Trump (a Daniels tweet on Monday emphasized that she’d fired him), said: “This criminal conduct reaches the highest levels of Nike and involves some of the biggest names in college basketball.”

Just moments later, it emerged that federal prosecutors were preparing charges against Avenatti alleging he had tried to extort Nike by threatening to release damaging information unless the company agreed to pay him and another celebrity lawyer millions of dollars. The Wall Street Journal reported that the lawyer, who wasn’t charged, was Mark Geragos, whose clients have included Michael Jackson and the actor Jussie Smollett.

“I’ll go take ten billion dollars off your client’s market cap,” Avenatti allegedly told Nike legal representatives, per the complaint. “I’m not fucking around.”

The timeline reveals that Avenatti was willing to repeat his threat after being asked by Nike’s attorneys.

“Nike will not be extorted or hide information that is relevant to a government investigation,” the company said. “When Nike became aware of this matter, Nike immediately reported it to federal prosecutors. When Mr. Avenatti attempted to extort Nike over this matter, Nike with the assistance of outside counsel at Boies Schiller Flexner, aided the investigation.”

The underlying scandal concerns the steering of exceptional athletes to play basketball for universities who are sponsored by apparel makers. Already, Nike rival Adidas ADS, +3.93% was found to have paid money to the families of recruits to ensure they signed with Adidas-sponsored schools, and again with the sneaker company when they turned professionals.

The U.S. attorney for the Central District of California joined in the melee with the news that it had charged Avenatti in connection with allegations he embezzled a client’s money in order to pay his own expenses and debts and also defrauded a bank by using phony tax returns to obtain millions of dollars in loans. Avenatti is facing up to 50 years in prison on those bank fraud and wire fraud charges, according to U.S. Attorney Nick Hanna.

Hanna told a news conference that a two-year tax collection and investigation effort by the Internal Revenue Service had uncovered the embezzlement, which involved a $1.6 million settlement owed a client in January 2018 that Avenatti allegedly used to cover his personal costs and costs relating to a coffee business.

When the client asked where his money was, Avenatti told him the money had not arrived and advanced $130,000 to help him meet his own obligations.

“In essence, he loaned the client’s own money to the client,” said Hanna. “To this day, nearly 15 months later, the client is still waiting for the bulk of his settlement even after hiring another attorney who discovered Avenatti had the funds all along.”

In the bank-fraud charge, Avenatti is alleged to have submitted fictitious tax returns for 2011, 2012 and 2013, in which he stated that he had earned $4.6 million in income in 2011, $5.4 million in 2012 and $4.1 million in 2013. Avenatti claimed he had made $1.6 million in estimated tax payments to the IRS in 2012, and paid $1.25 million in 2013, when he has not yet filed returns or paid any taxes for those years, said Hanna.

Hanna said the New York and California cases were separate, but that the two coordinated on the arrest. A warrant was issued on Friday, he said, but he was unable to say whether it came before or after the news that Special Counsel Robert Mueller had submitted his report to the Justice Department on the 2016 presidential election.