Alex Jones using bankruptcy to avoid payouts, Sandy Hook families allege

Sandy Hook families have asked a federal judge to remove InfoWars founder Alex Jones from control of his main company, alleging that Jones has siphoned off millions of dollars and is abusing the bankruptcy system to avoid paying court judgments for portraying the 2012 school shooting as a hoax.

Jones placed Free Speech Systems into bankruptcy in late July while he was in the middle of an Austin trial that ended with jurors awarding almost $50 million to the parents of 6-year-old Jesse Lewis, one of 20 children and six educators killed at Sandy Hook Elementary School in Newtown, Conn.

Sued by other Sandy Hook families, Jones and Free Speech Systems are facing a similar trial this month in Connecticut and another trial later this year in Austin.

With potentially large jury awards looming, bankruptcy proceedings for Free Speech Systems — which reported $9.4 million in profits on $14.3 million in income in the first five months of this year — could determine how much money the Sandy Hook families receive, as well as the continued viability of Jones’ Austin-based InfoWars media system.

Lawyers for the Sandy Hook parents recently told U.S. Bankruptcy Judge Christopher Lopez that they don’t trust Jones to operate Free Speech Systems “in a way that maximizes the bankruptcy estate’s value.”

Instead, they asked the judge to make three significant changes:

• Remove Jones’ chosen chief restructuring officer, arguing that Marc Schwartz “is unable or unwilling to operate with competency and impartiality.”

• Place Free Speech Systems under the control of a bankruptcy trustee, not Jones or Schwartz.

• Create a special committee to protect the Sandy Hook families’ interests by monitoring Free Speech System’s financial decisions and investigating its assets, liabilities and financial condition. The “tort claimants committee” also would weigh in on the final bankruptcy plan, which will determine how Free Speech System’s debts to the Sandy Hook families and others will be paid off, and whether the business gets reorganized or liquidated to best meet its financial obligations, lawyers for the families told Lopez in a court filing.

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“So long as FSS possesses its assets and controls its operations, the Sandy Hook families’ prospects of a full and fair recovery remain in jeopardy,” the filing said.

The families’ request will be discussed in a hearing, likely to be held in mid-October.

“There are some serious allegations in there, and we have to find out what’s going on,” Lopez told lawyers who assembled in his Houston courtroom on Aug. 29 hearing to handle unrelated matters. “The request is very serious.”

In their court filing, the families accused Free Speech Systems of squandering assets through misconduct, conflicts of interest and fraudulent transfers of money to Jones.

“FSS’s conduct leading up to and since filing this bankruptcy reveals an out-of-control debtor that is still operated by Jones for the sole benefit of Jones,” the Sandy Hook families alleged.

The court filing complained that Free Speech Systems paid Jones $18 million from 2018-21 on top of his annual salary of about $625,000 — payments that began the same year the parents filed defamation lawsuits after Jones repeatedly called the school shooting a hoax to advance gun control and portrayed the students’ parents as government collaborators or hired actors.

Last April, Jones raised his annual salary to more than $1.3 million after entering into an employment agreement with Free Speech Systems after a decade of owning and running the company, the filing said.

Bankruptcy documents also indicate that Jones received additional payments of up to $62 million, the filing said, though lawyers for Jones countered that the claim was mistaken and based on “misunderstanding the difference between a balance sheet and an income statement.”

The filing’s biggest complaint focused on a $54 million debt Free Speech Systems says it owes to PQPR Holdings, calling the “supposed debt” the “centerpiece of Jones’s plan to avoid compensating the Sandy Hook families.”

PQPR is owned and operated directly and indirectly by Jones and his parents, the families alleged, adding that the debt conveniently materialized around 2020, when their lawsuits against Jones and Free Speech Systems were gaining ground in Texas and Connecticut.

“Money (Free Speech Systems) pays PQPR ends up in Jones’s pockets,” the families alleged. “A $54 million supposed debt to insiders … depicts a company being drained into insolvency to benefit insiders to the detriment of creditors.

A tort creditors committee could examine the debt as well as payments made to Jones, the families argued, including cryptocurrency worth almost $8 million that was donated to Free Speech Systems in April and May. “Jones personally cashed out $4 million to $5 million of those donations and put it into his personal bank account,” the families told the judge.

Jones has said he intended most of the money to go toward operating Free Speech Systems and legal bills.

Schwartz and Free Speech Systems will be given a chance to oppose the families’ requests. In the meantime, lawyers for PQPR asked the judge to reject the request for an oversight committee, saying it would lead to “protracted and perhaps unfounded, but certainly unnecessary, litigation.”

A better alternative, they said, would be to have the already named bankruptcy trustee, who is not aligned with any party, conduct any investigation into Free Speech Systems’ finances.

This article originally appeared on Austin American-Statesman: Sandy Hook families: Alex Jones using bankruptcy to avoid payouts