On Monday, U.S. Bankruptcy Judge Christopher Lopez officially terminated the proposed deal to transfer ownership of Infowars to The Onion. The court dismissed the intricately structured bid, which aimed to pivot the controversial platform from being a source of conspiracy theories and misinformation to a satirical website funded by advertisements promoting gun control initiatives. This decision reflects a significant turning point in the ongoing saga surrounding Infowars and its infamous founder.
In essence, the court concluded that The Onion’s bid was overly convoluted and did not present a viable revenue stream for the bankruptcy estate. The complexity of the offer included numerous variables, contingencies, and uncertainties that ultimately led Judge Lopez to determine that the trustee did not exercise sound business judgment, thereby leaving potential funds for creditors unaddressed.
Conspiracy theorist Alex Jones has persistently sought to evade responsibility for defaming the families of the victims from the tragic Sandy Hook Elementary School shooting that occurred in 2012. His noncompliance with discovery requests resulted in default judgments against him in civil lawsuits filed in Connecticut and Texas, accumulating a staggering total of $1.5 billion in damages, which was later adjusted to approximately $1.3 billion following an appeal. For over two years, Jones attempted to manipulate the bankruptcy process, first by delaying the trials, and subsequently attempting to obstruct the enforcement of the judgments.
Judge Lopez ruled that the judgments related to Sandy Hook were classified as willful torts, making them largely non-dischargeable in bankruptcy proceedings. Consequently, he dismissed Infowars’s parent company, Free Speech Systems, from Chapter 11 bankruptcy protection. Following this ruling, Jones shifted his personal bankruptcy status from a Chapter 11 reorganization to a Chapter 7 liquidation, prompting the court to appoint Chapter 7 Trustee, Christopher Murray, to liquidate Jones’s assets, which included FSS, of which he was the sole proprietor.
An auction was scheduled for November, attracting only two serious bidders: First United American Companies LLC (FUAC), led by Charlie Cicack, one of Jones’s vendors, who intended to keep Jones operational, and Global Tetrahedron (GT), the parent entity of The Onion, supported by the Sandy Hook parents. This auction represented a pivotal moment in the unfolding narrative of Infowars and its future direction.
FUAC, focusing on acquiring the Infowars store, initiated the bidding with an offer of $1.2 million, while GT, primarily interested in intellectual property, countered with a $1 million bid. Due to the structure of the bids and the nature of the assets involved, Murray and the auctioneers decided against conducting a traditional “open cry” auction and opted for a more streamlined approach, allowing the parties to submit best and final offers on multiple lots simultaneously.
This decision was influenced by the complexities of the auction, as multiple groups of assets were involved and only two bidders were present. Additionally, GT’s bid was structured as a formula rather than an all-cash offer, making it impractical to calculate during live competitive bidding. This unique circumstance required careful consideration to ensure a fair and equitable auction process.
The Connecticut plaintiffs, armed with a $1.3 billion judgment, overshadowed other creditors, including those in Texas owed $50 million. The Connecticut parents were entitled to approximately 96 cents of every dollar generated from the sale, and they agreed to allocate some amount of the proceeds to the Texas parents, aiming to make the GT offer more appealing than any competing bid, which could reach up to $7 million. However, this arrangement necessitated intricate calculations, factoring in the trustee’s fees, auctioneer’s fees, legal expenses, and the competing bids, along with the creditors’ proportional shares.
In the subsequent bidding round, GT increased their offer to $1.75 million, while FUAC significantly raised theirs to $3.5 million. This marked a notable escalation from both bidders. Murray ultimately declared GT as the winning bidder since the $3.5 million fell below the $7 million threshold, allowing the Connecticut parents to easily reduce their share of proceeds to make the GT offer more favorable for the Texas parents. This decision prompted FUAC and Jones to rush into court, alleging collusion and impropriety involving Murray, GT, and the Sandy Hook parents.
During the extensive hearings over the course of Monday and Tuesday, the parties scrutinized both the trustee and the auctioneer. It became evident that Jones and FUAC’s allegations of improper contacts lacked merit. Judge Lopez chastised Murray for not adequately investigating whether GT was prepared to pay $1.75 million solely for the intellectual property, allowing FUAC to bid $3.5 million for the store. This oversight seemingly influenced the court’s conclusion that Murray failed to exercise appropriate business judgment, potentially leaving millions unclaimed.
Moreover, Murray struggled to provide definitive figures on any variables within the GT funding formula, particularly as the administrative and legal fees continued to accumulate during his testimony, further complicating the financial landscape as the Texas and Connecticut parents awaited their settlements.
Most legal analysts did not anticipate Judge Lopez to nullify the sale. Murray was expected to receive considerable deference under the court’s wind-down order and the business judgment rule. There was no indication of any bad faith actions on his part, and all creditors were in agreement with the auction process. Notably, FUAC had initially agreed to the best and final offer round, only raising objections after their bid was unsuccessful.
However, the fluctuating nature of GT’s bid presented a significant challenge for the court. In a lengthy and somewhat convoluted announcement of his ruling, made at 10:30 PM local time, Judge Lopez admonished Murray for not attempting to negotiate better terms with both FUAC and GT. He described the $3.5 million offer as “too low,” particularly in light of the $50 million owed to the Texas plaintiffs. Remarkably, none of the creditors, including the Texas plaintiffs, voiced objections to the GT deal, and even Alex Jones’s PQPR LLC, which claims a $78 million debt for supplements supplied to FSS, did not contest the arrangement. Furthermore, the Connecticut plaintiffs ultimately agreed to reduce Jones’s indebtedness by $7 million, thereby undermining his claim of injury resulting from the GT deal’s structure.
And yet … we find ourselves in this uncertain situation, with no clear plan for the future.
The court dismissed Jones’s motion for disqualification, along with FUAC’s attempt to be recognized as the auction winner. Judge Lopez opted not to mandate another auction, instead instructing Murray to return to the drawing board and seek a resolution within the next 30 days … whatever that may entail. The court expressed skepticism about the potential for additional funds being left unclaimed, questioning how a business generating millions monthly in supplement sales could attract such a low auction price. The sale only attracted two bidders, with Cicack reportedly utilizing his father-in-law’s retirement savings to finance his bid. It remains uncertain how creditors could benefit from any undiscovered deal compared to a ratified auction outcome. The administrative and legal expenses incurred are irrecoverable costs that will ultimately diminish the creditors’ financial recovery.
Yet, it appears that The Onion remains in the game, seeking further opportunities.
A statement from The Onion about InfoWars. pic.twitter.com/dtiQHSZ9vj
— follow @bencollins on bluesky (@oneunderscore__) December 11, 2024
Liz Dye resides in Baltimore, where she curates the Law and Chaos substack and podcast.
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