Alex Jones Bankruptcy Case Just Keeps Getting Weirder

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(Photo by Drew Angerer/Getty Images)

On Friday afternoon, US Bankruptcy Judge Christopher Lopez held the second hearing on three companies owned by Alex Jones until last month, when he abruptly transferred ownership of the LLCs to a newly created Litigation Settlement Trust and declared them bankrupt. Because the companies were named defendants in the tort suits filed in Connecticut and Texas by survivors of victims of the Sandy Hook school shooting who suffered years of harassment after Jones called them “crisis actors,” Jones was able halt the imminent trials before a jury could assign a dollar figure to the damage he caused the plaintiffs.

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What a lucky coincidence!

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Or perhaps it was not a coincidence at all, according to US Bankruptcy Trustee Kevin Epstein, who filed an absolutely scathing motion to dismiss the cases, which he characterized as “classic bad faith filings,” echoing similar motions filed by the Connecticut and Texas plaintiffs last week characterizing the bankruptcies as a sham to evade litigation. But the Trustee’s brief was even more blunt and aggressive than the one filed by people who’d been accused of faking the deaths of their own children.

By the admission of Jones’s own proposed restructuring officer, the three companies have no employees and virtually no assets and do no business — whereas Jones paid himself more than $20 million between 2018 and 2021, and his main company Free Speech Systems (FSS) netted $56 million last year. The Trustee accuses Jones of using “a novel and dangerous tactic that is abusive and undermines the integrity of the bankruptcy system” by “filing bankruptcy for three non-operating members of a larger enterprise to channel and cap liability against the other, revenue-generating members of that enterprise and its owner using a bankruptcy subchapter designed to aid small, struggling businesses.”

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In short, the Trustee noticed that Jones is proposing a take-it-or-leave-it offer of $10 million in the Litigation Settlement Trust — less whatever the lawyers and trustees get paid — to force the Sandy Hook plaintiffs to drop their cases against him. And that he’s using subchapter V, which is supposed to protect mom-and-pop ventures with business debts of less than $3,024,725, not, say, eight-figures of tort liability from twenty-odd plaintiffs who most assuredly never did business with InfoWars.

In fairness, it was hard not to notice when Jones’s own lawyer Norm Pattis shot his mouth off to the Wall Street Journal , saying “We’re turning to the bankruptcy courts to compel the plaintiffs to estimate the value of their claims in open court by discernible evidentiary standards,” and adding that, “The plaintiffs have turned this litigation into a macabre morality play and have refused to negotiate in good faith. We hope they will show respect to the federal courts.”

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If Pattis thought that his admission that his client was exploiting the bankruptcy process for litigation advantage was not going to end up in a federal filing, he thought wrong.

“These cases are demonstrably not about reorganizing, rehabilitating, or granting a fresh start to an honest, unfortunate debtor,” the Trustee went on. “The Debtors’ bankruptcy filings do not serve any recognized objective of the Bankruptcy Code. These Debtors have no businesses and no purpose to reorganize.”

And not for nothing, but if this succeeds, Jones’s bankruptcy gambit will allow him to shield his own personal assets as he could not do if he himself filed for bankruptcy.

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If Alex Jones were a debtor, he would not be able to discharge the claims of the Sandy Hook Plaintiffs because section 523(a)(6) excepts from discharge debts arising from willful and malicious injury. And both Alex Jones and FSS as debtors would be subject to section 1129(a)(7)’s best interest of creditors’ test for plan confirmation, requiring full disclosure of the value of their assets and a showing that impaired, dissenting creditors are receiving at least as much as they would in a chapter 7 liquidation.

In court, the Jones entities’ lawyer Kyung Shik Lee argued that Alex Jones couldn’t possibly declare bankruptcy without ruining his brand, at which point there’d be no money left for any of the plaintiffs. This position is slightly undercut by the fact that an anonymous donor sent Jones $1 million of Bitcoin last week after the bankruptcies were filed, money which he immediately pocketed before deleting the wallet.

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The Trustee noted Jones’s refusal to comply with discovery, which netted him death penalty sanctions in both the state suits, and his recent refusal to be deposed, which got him escalating fines in Connecticut, as well as a recent lawsuit in Texas which accuses him of siphoning tens of millions of dollars out of FSS into shell companies controlled by him and his family.

“[T]he history of these lawsuits evidences a pattern of behavior—of repeated obstruction and delay tactics—that is simply being repeated and moved to a different forum by these bankruptcy filings,” the Trustee wrote. And although the companies amended their original plan for the Litigation Settlement Trust to be slightly less blatant about it being a vehicle for Jones and FSS to cap their liabilities, the Trustee points out that the original plan is reflective of the parties’ true intent, and should not be disregarded because it finally occurred to them that subtlety might be a better strategy.

“Although the Debtors have not yet filed a plan, the PSA and LST have set the table for these cases in a very particular way—and it is already apparent what type of meal we’re going to get,” he wrote.

And you thought bankruptcy law was boring!

On Friday, Judge Lopez promised to move quickly to resolve the motions, setting a hearing for May 29. At which point we’ll find out if this turkey gets yeeted into the sun — or merely back to Texas and Connecticut where it belongs.

InfoW, LLC (22-60020) [Bankruptcy Docket, via Court Listener]

Liz Dye lives in Baltimore where she writes about law and politics.

Topics

Alex Jones, Bankruptcy, Government, Guns / Firearms, Norm Pattis, Sandy Hook