Alex Jones facing bankruptcy woes ahead of trial

When Alex Jones’ business entities filed bankruptcy cases just days before a trial was set to award defamation damages, a Justice Department overseer and a group of Sandy Hook families questioned the timing and legitimacy of the 11th-hour action that put everything on hold.

What may have surprised some observers on Friday, however, was how many questions and concerns federal bankruptcy judge Christopher Lopez voiced about Jones’ filings after the judge determined that for the moment, he would take no action to sanction the bankruptcy process.

“No one is going forward today on anything,” Lopez told a crowd of 70 attorneys and observers, shortly after the video-conferenced hearing began from Southern Texas Bankruptcy Court. “(But) I have questions and I am going to get my questions answered.”

What followed was a spirited two-hour hearing about the highest-profile defamation cases in the country, which have been in the national headlines for a month.

“There is clearly a lot of emotion on both sides, which is completely justifiable,” Lopez said. “I think some of these concerns are legitimate.”

Lopez’s main concern was the way Jones proposed to use the bankruptcy process to pay damages in three defamation cases he lost to Sandy Hook families in Texas and Connecticut, without Jones himself filing for bankruptcy.

Jones proposed to do this by filing bankruptcy for “InfoWars” and two other business entities and setting up a “litigation settlement trust” to be administered by two former Texas bankruptcy judges. The trust would be funded by Jones himself and his Free Speech Systems, starting with $10 million.

The reason Jones would have to fund the trust is because two of the business entities in question have no cash and the third has a monthly income of $38,000, his representatives said.

That concerned Lopez. “One of the concerns that I have is … if the third-party contributor decides to pull the plug at any point, the life blood of these Chapter 11 cases go away,” Lopez said. “There has to be some guaranteed source of funds … and it cannot be based on something I haven’t approved.”

Jones’ own representatives did not help clear up questions on Friday when they conceded that they were amending the details of that litigation settlement trust as they spoke.

“On the settlement fund, I want the parties to have the opportunity to negotiate to get comfortable with it in light of all the things that have been said about it,” said Kyung Lee, Jones’ lead bankruptcy attorney.

“I need to tell you that the parties have worked very hard in good faith to bring a proposal to pay creditors and pay them in an equal fashion,” Lee said. “This allows a resolution to the bickering that has been going on for years…(but) I hear nothing but complaining by those who want the money or those who are entitled to the money.”

With good reason, the Sandy Hook families’ attorneys responded.

“They want the benefit of bankruptcy without being in bankruptcy,” said Randy Williams, an attorney representing an FBI agent and 14 people from eight families who lost loved ones in the Sandy Hook massacre. “Mr. Jones and (Free Speech Systems) are staying outside of it but that is not right; they are getting the advantage of keeping that case from going forward on Monday, and our folks are waiting to liquidate their claims.”

An attorney for a Justice Department official who oversees bankruptcy cases in southwestern Texas agreed.

“These cases appear to be orchestrated by (Jones) to limit his liability and the liability of FSS,” said Jayson Ruff, who represents U.S. Trustee Kevin Epstein.

Protecting Alex Jones’ brand

Jones himself was not in the courtroom, because Jones himself has not filed for bankruptcy.

When asked why Jones didn’t file for bankruptcy, a representative said Jones feared he would lose credibility with listeners and product sales would suffer.

“InfoWars’ is a prominent trademark in the conspiracy theory community and Alex Jones is equally as prominent,” said Marc Schwartz, the proposed chief restructuring officer for Jones’ business entities in bankruptcy. “It would ruin his name and harm his ability to sell merchandise.”

For the time being, Jones’ defamation awards trials in Texas and Connecticut are on hold.

It’s the latest development in a series of adverse events for Jones, whose fortunes turned after he called the 2012 massacre of 26 first-graders and educators “staged,” “synthetic,” “manufactured,” “a giant hoax,” and “completely fake with actors.”

In bankruptcy court on Friday, Schwartz said Jones has paid $10 million in attorneys fees because of the Sandy Hook defamation cases, and that Jones has seen his revenue drop by $20 million.

Schwartz, who described the Jones brand as the “Coca-Cola of the conspiracy theory community,” said Jones’ name drove merchandise sales of at least $76 million in fiscal 2019.

“If you look at the impact of litigation in 2021, his estimated revenue … is $56 million, or $20 million less,” Schwartz said.

Lopez scheduled a status conference for April 29 when he expects to get an update and to have at least one motion to dismiss the bankruptcies from Sandy Hook family attorneys.

“Your honor this just isn’t right — this is illegitimate,” said the Connecticut families’ attorney Williams. “We do intend to file an emergency motion to dismiss.”