On Friday afternoon, U.S. 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 terminated them. declared bankrupt. Because the companies have been named defendants in tort lawsuits filed in Connecticut and Texas by survivors of Sandy Hook school shooting victims who suffered years of harassment after Jones branded them ‘crisis actors’, Jones was able to halt the impending trials before a jury could award an amount for the damages he caused to the plaintiffs.
What a happy coincidence!
Or maybe it wasn’t a coincidence at all, according to US bankruptcy trustee Kevin Epstein, who filed an absolutely scathing motion to dismiss the cases, which he called “classic bad faith filings.” echoing similar motions filed by plaintiffs in Connecticut and Texas. last week, describing the bankruptcies as a sham to escape litigation. But the fiduciary’s brief was even more blunt and aggressive than that filed by people accused of faking the deaths of their own children.
By the admission of the head of restructuring proposed by Jones, the three companies have no employees and virtually no assets and no business – while Jones paid himself more than $20 million between 2018 and 2021, and his main company Free Speech Systems (FSS) brought in $56 million last year. The trustee accuses Jones of having used “a new and dangerous tactic that is abusive and undermines the integrity of the bankruptcy system” by “filing for bankruptcy three non-operating members of a large corporation in order to channel and limit liability against other income-generating members of this business and its owner using a bankruptcy sub-chapter designed to help struggling small businesses.
In short, the trustee noticed that Jones was offering a take-it-or-leave-it offer of $10 million in the Litigation Settlement Trust — minus whatever attorneys and trustees receive — to force the Sandy Hook plaintiffs to drop out. their lawsuits against him. And that he’s using subchapter V, which is supposed to protect family businesses with business debts under $3,024,725, and not, say, eight figures of tort from about 20 plaintiffs who don’t have definitely never done business with InfoWars.
In all honesty, it was hard not to notice when Jones’ own attorney, Norm Pattis, mocked The Wall Street Journal, saying, “We look to the bankruptcy courts to compel plaintiffs to estimate the value of their claims in open court to discernible evidentiary standards,” and adding that “the plaintiffs have turned this litigation into a macabre morality game and have refused to negotiate in good faith. We hope they will show respect to the federal courts.
If Pattis thought his admission that his client was exploiting the bankruptcy process for legal purposes was not going to end up in a federal case, he thought wrong.
“These cases are clearly not about reorganization, rehabilitation or granting a fresh start to an honest and unfortunate debtor,” the trustee continued. “Debtor filings for bankruptcy serve no recognized purpose of the Bankruptcy Code. These debtors have no businesses and no reason to reorganize.
And not for nothing, but if it succeeds, Jones’ bankruptcy gamble will allow him to protect his own personal assets in a way he couldn’t if he had filed for bankruptcy himself.
If Alex Jones were a debtor, he would not be able to discharge the Sandy Hook plaintiffs’ claims because section 523(a)(6) excludes discharge debts arising from intentional and malicious harm. And Alex Jones and FSS as debtors would be subject to the creditors’ best interests test of section 1129(a)(7) for confirmation of the plan, requiring full disclosure of the value of their assets and proof that dissenting and impaired creditors are to receive at least as much as they would in a Chapter 7 liquidation.
In court, Jones entities attorney Kyung Shik Lee argued that Alex Jones could not declare bankruptcy without ruining his brand, in which case there would be no money left for any of the plaintiffs. This position is slightly undermined by the fact that an anonymous donor sent Jones $1 million worth of Bitcoin last week after filing for bankruptcy, money he immediately pocketed before deleting the wallet.
The administrator noted Jones’ refusal to comply with the discovery, which earned him death sentences in both lawsuits, and his recent refusal to be deposed, which earned him escalating fines in Connecticut. , as well as a recent lawsuit in Texas that accuses him of diverting tens of millions of dollars from the FSS to shell companies controlled by him and his family.
“[T]The history of these lawsuits demonstrates a pattern of behavior – of repeated stonewalling and delaying tactics – that is simply repeated and moved to another forum by these bankruptcy filings,” the trustee wrote. And although the companies have changed their original plan for the Litigation Settlement Trust to be slightly less blatant that this is a way for Jones and FSS to cap their liabilities, the trustee points out that the original plan reflects the true intention of the parties and should not be ignored as it eventually 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 stage for these cases in a very particular way – and it is already known what type of meal we are going to have,” he said. he writes.
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 that point, we’ll know if that turkey is thrown into the sun — or just back to Texas and Connecticut where it belongs.
InfoW, LLC (22-60020) [Bankruptcy Docket, via Court Listener]
Dye Liz lives in Baltimore where she writes on law and politics.