Sandy Hook Families Warn of New Infowars Bankruptcy

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Families of victims of Sandy Hook shootings have been quick to sound the alarm over the latest legal maneuver by far-right radio show Infowars and its owner, Alex Jones.

Infowars’ eventual parent company, Free Speech Systems LLC, filed for Chapter 11 bankruptcy on Friday, just months after three Jones-affiliated companies did the same in a failed attempt to recover defamation damages owed to Sandy Hook’s families. settle and settle. At an initial hearing Monday, lawyers for the families expressed concern about the structure of the final step and its timing — right in the middle of a two-week lawsuit in Texas that will put a dollar figure on the damages.

Free Speech Systems is looking for a special kind of bankruptcy protection that will help small businesses survive bankruptcy with relatively little creditor input. Companies are typically only allowed to use those types of proceedings if they owe less than $7.5 million. Infowars’ parent company has more than $50 million in debt, according to court filings, much of which is owed to an entity owned by founder Alex Jones.

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“There are already a lot of red flags around this bankruptcy,” Avi Moshenberg, a lawyer who headed a fraudulent transfer case against Jones and Infowars in Texas, said during Monday’s Chapter 11 hearing. “This is hardly a small business.”

Free Speech Systems syndicates the Infowars radio show — in which Jones often spews conspiracy theories — and sells nutritional supplements. The company generated about $65 million in revenue in 2021, most of which came from supplement sales, to post a net loss of about $11 million, court documents show.

An attorney for the US Trustee, a branch of the Justice Department that oversees the bankruptcy court, said during the hearing that he would urge the judge overseeing the case to delay the trial. “Transparency is 100% crucial in this case,” said lawyer Ha Minh Nguyen. A committee of people suing Jones and Infowars may need to be formed in the bankruptcy, Nguyen added.

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The transparency Infowars provides is already showing financial disarray at the company. Since Chief Restructuring Officer W. Marc Schwartz arrived on the scene in May, he has found that the 2021 books were never closed, internal controls were inadequate and almost no transactions were recorded in 2022, he said in an affidavit.

“We have very serious concerns based on the discovery in Connecticut that Alex Jones has been systematically raising large amounts of money from Free Speech Systems,” Alinor Sterling, a lawyer representing Sandy Hook’s families in a defamation lawsuit, said at the hearing. . Sterling’s clients plan to “fully participate” in the bankruptcy process, she said.

Schwartz “continues to evaluate whether the estate has grounds for recovering any payments or distributions made to Alex Jones,” he said in his statement. Lawyers for Free Speech Systems did not immediately respond to an email asking for comment Monday.

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The Texas defamation lawsuit against Jones and Free Speech Systems may be completed as early as Friday. A separate trial in Connecticut is scheduled for September. Judges in both Texas and Connecticut have already issued default judgments against Jones after he failed to hand over documents as part of the lawsuits, but the lawsuits will help determine damages to be awarded.

The case is Free Speech Systems LLC, 22-60043, US Bankruptcy Court for the Southern District of Texas (Victoria).

Photo: Alex Jones, radio host and creator of the InfoWars website, center, speaks into a megaphone as protesters gather during a ‘You Can’t Close America’ rally outside the Texas State Capitol in Austin, Texas, US on April 18, 2020. Protesters gathered to call for state reopening amid coronavirus pandemic./Bloomberg

Copyright 2022 Bloomberg.

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