Alex Jones tries to dodge Sandy Hook into bankruptcy

Alex Jones of Infowars is back in bankruptcy court again.

why does it matter: For the second time this year, The right-wing agitator tests the limits On how companies β€” and their owners β€” use US bankruptcy law to reduce the cost of litigation compensation.

catch up quickly: Jones and his Empire Infowars are In the midst of a tort trial They have already been found responsible in defamation cases brought by the families of the Sandy Hook school shooting victims. Jones repeatedly referred to the shooting as a hoax.

  • Companies use Chapter 11 bankruptcy when they owe creditors more money than they already have, and need to have a settlement and payment plan in place.
  • Creditors can take the form of bondholders, or litigants like Sandy Hook families. Usually, the company needs the approval of these creditors to complete the bankruptcy plan.

playing condition: Jones’ previous bankruptcy gambit involved the use – or abuse – of a special subsection of the code intended only for small businesses.

  • This debtor-friendly process reduces many of the rights creditors have in a regular case under Chapter 11β€”most importantly, the ability to form creditors’ committees with legal representation, and a greater voice in accepting or rejecting a bankruptcy plan.
  • In April, Jones put three fictitious companies linked to Infowars in sub-chapter five, the companies he had fired in order to limit money that would go toward a bankruptcy settlement with the Sandy Hook families.
  • But in June, Jones withdraw bankruptcy petitions. In a motion seeking to dismiss the case, the Justice Department’s bankruptcy watchdog called the strategy “new and dangerous,” arguing that it would have undermined the integrity of the system.

But it looks like Jones hasn’t given up His willingness to use subchapter V, and his ability to force a settlement on creditors.

  • This time, he introduced the parent company of his Infowars business β€” at first it was a seemingly more legitimate move.

catch: It still uses the small, business-focused sub-chapter V, in which a company cannot have more than $7.5 million in “qualifying debt” to be eligible.

  • But Jones’s bankrupt Free Speech Systems (FSS) owes much more — $54 million to a subsidiary controlled by Jones and his family, plus tens of millions it likely owes to Sandy Hook’s claimants.

So, what gives? There are some technical aspects… for one of them, the debt to insiders (like $54 million) It is not considered a “qualifying debt”.

  • Ditto for “Unliquidated” debt A legal term for obligations that are not formally quantified, such as pending litigation damages.

this is the problem. Jones filed for FSS sub-chapter 5 bankruptcy in order to deal with litigation damages, But the amount of these damages is almost certain that the company Not eligible for actual use Fifth section.

πŸ’­ Our thought bubble: Timing is everything. File an FSS (appropriate) file In the middle of the damages trial It could put an imminent number on Sandy Hook’s commitments.

  • The bankruptcy court can either allow a subsection V case to proceed, based on the idea that eligibility is determined by a financial snapshot at the time of filing Or you may decide that compensation for damages is a game-changer.

not worth anything Bankruptcy disclosures show that over the past few years, while Sandy Hook’s lawsuit was ongoing, about $62 million flowed in from the FSS in “member raffles.”

  • Avi Moschenberg, a lawyer for Sandy Hook families, says it’s implied that Jones, the sole owner of the company.

what do you want to watch: Moschenburg says that even if the case remains in subchapter V, creditors can ask the judge for more oversight and transparency.

  • β€œIt is unacceptable for us to do the fifth regular sub-chapter without transparency, oversight or investigation. This is a huge central issue to this bankruptcy,” Moschenberg told Axios.

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