Federal prosecutors in New York City alleged Avenatti used a doctored document to divert about $US300,000 ($A436,087) Daniels was supposed to get from a book deal, then used the money for personal and business expenses.

Only half of that money was paid back, prosecutors said.

Daniels isn't named in the court filing but the details of the case, including the date her book was released, made it clear she was the client involved.

Avenatti denied the allegations on Twitter and later added his agreement for representing Daniels "included a percentage of any book proceeds."

The charges pile on top of previous allegations of legal misconduct by Avenatti, who represented Daniels when she sued to be released from a non-disclosure agreement involving an alleged tryst with Trump.

Avenatti was previously charged in New York with trying to extort up to $US25 million ($A36 million) from Nike by threatening to expose claims that the shoemaker paid off high school basketball players to steer them to Nike-sponsored colleges. In Los Angeles, he's facing a multi-count federal indictment alleging that he stole millions of dollars from clients, didn't pay taxes, committed bank fraud and lied during bankruptcy proceedings.

Avenatti has denied the allegations against him on both coasts.

In announcing the new charges Wednesday, prosecutors said Avenatti sent a "fraudulent and unauthorised letter" to Daniels' literary agent, instructing the agent to send payments not to Daniels but to a bank account Avenatti controlled. They said he used the stolen funds to pay employees of his law firm and pay for hotels, airfare, dry cleaning and his Ferrari.

"Far from zealously representing his client, Avenatti, as alleged, instead engaged in outright deception and theft, victimising rather than advocating for his client," Manhattan US Attorney Geoffrey Berman said in a news release.

Daniels raised concerns with Avenatti about late payments around the time her book, "Full Disclosure," was published in October, according to the indictment.

"When is the publisher going to cough up my money," she asked Avenatti in early December, according to the indictment.

Avenatti responded that he was "working them and threatening litigation," prosecutors said, but he did not tell Daniels he had already received the money.

In a statement, Daniels said Avenatti had launched a fundraising effort to raise money for her legal case without telling her. She also said he had filed a defamation lawsuit against Trump, on her behalf, against her wishes.

Australian Associated Press