Bankrupt Alex Jones Bankrupts Bankruptcy

Canceling The Onion's purchase of Infowars is a win for Alex Jones, a blow to the Sandy Hook families, and a low moment for a normally strong court system

Liar, clown, deadbeat, and victor. Sounds familiar.

This was supposed to be a quick, 500-word response to the recent ruling. It isn’t. I’ll try to provide pithier responses and comments and further thoughts at https://bsky.app/profile/kolyin.bsky.social.

Someone who is bankrupt can be called “a bankrupt.” So this could have been titled “Bankrupt Bankrupts Bankruptcy,” or even “Bankrupt Bankrupt Bankrupts Bankruptcy” if you could handle it. I just want you to know that I was aware of that, but decided it was too confusing. And I’ll never stop second-guessing that decision, which is why I shouldn’t be a judge. They have to make clear, well-reasoned decisions that resolve much harder questions, and move forwards confidently.

Sometimes that doesn’t happen. The latest stumble in the ongoing collapse of Alex Jones is a strong example of the judicial system performing, perhaps, to its own satisfaction but letting down the general public. A public that’s now being treated to yet another victory dance by yet another bad actor boasting about a strong and surprising win.

A very quick background

Alex Jones is a wretched liar whose business, for many years, has been profiting off of the misery and suffering he creates. His intentional attacks on the families of children killed at Sandy Hook led to a series of trials, where he repeatedly cheated to try to escape being held responsible. He failed, and the juries eventually awarded his victims around $1.5 billion in civil damages. (That’s been reduced on appeal to roughly a billion.) He can’t pay it, so he’s in bankruptcy.

That process has involved selling off his various assets, from guns and trucks to some kind of cryonic freezer. But the crown jewel of Alex Jones’s empire of pain is the machine that made him a multimillionaire: Infowars, the company under whose banner he broadcasts and that sells his dubious dietary supplements. After a long and convoluted bankruptcy process, the court ordered the trustee—a government employee who manages the bankruptcy process—to sell off the assets of Free Speech Systems, the company that owns Infowars and its related intellectual property.

Global Tetrahedron (GT), a holding company for The Onion, offered about a million in cash. The Connecticut Sandy Hook plaintiffs (CSH, because there were Texas Sandy Hook-related plaintiffs too) offered to forgive their 95%ish share of that cash and send it to the other creditors. The crossing-over point, where someone could offer enough cash to do better for the creditors than that hybrid bid, was about $7 million. This is an oversimplification, but not a huge one. The Onion also pledged to share revenues it would make from using Infowars assets, but the trustee didn’t take that into account in selecting their bid.

First American United Companies (FUAC) is a shady LLC that currently markets Alex Jones’s supplements for him. They placed the only other bid: about $3 million in cash. They did not intend to share revenues with Alex Jones’s victims; it came out at the hearing that they intended to immediately enter into an employment agreement with Alex Jones, presumably to keep the pill mill moving and his lies in as many ears as possible.

The trustee did the sort of math lawyers do and discovered that $7 million is more than $3 million. He declared GT the winner. FUAC objected and Judge Lopez, the presiding bankruptcy judge, permitted a couple of weeks of discovery prior to a hearing on whether or not to confirm the sale to The Onion. That has now happened, and the judge blocked the sale for some poorly-articulated reasons, in favor an even more poorly-articulated process that has yet to be determined but came at great expense to the creditors.

Recent developments

It turns out that the trustee read GT’s bid, which was essentially “we’ll pay whatever the other guys are offering plus $100k in waivers, up to a total valuation of $7 million” as a flat bid of $7 million. That’s appropriate; his job was to get the best price possible, and he told the bidders to give him their best-and-final offers. He went back to the GT bidders to resolve any confusion, and they agreed that his interpretation was valid. The bid was valued at $7 million.

But Judge Lopez found this procedure objectionable. After two days of hearings, he gave a long and rambling oral ruling from the bench. He explained that the process was unduly confusing, that the trustee had not properly allowed FUAC to try to overbid GT’s offer, that there was not enough work done to maximize the value of the assets at auction, and that the trustee was wrong to switch from the open auction he initially proposed to a sealed best-and-final bid process. I had predicted some difficulties with that issue earlier, although I did not call the outcome anywhere near correctly.

The fact that the GT lawyers were initially confused—allegedly—about how their bid was being interpreted was particularly disturbing to the judge. It would be hard to list out the exact reasons for his dissatisfaction, as he rambled from the bench for quite a while. He was unhappy that the trustee hadn’t tried to divvy up the lots and sell different portions of the assets to the two bidders, but didn’t ask the trustee to explain in detail why he decided not to.

There are, to be clear real potential problems with approving the GT bid. @serow.bsky.social very cleanly identified one of the biggest, and one I’ve been overlooking (along with most other observers, I think). The “distributable fee waiver” didn’t reduce the estate’s indebtedness to Alex Jones, it just waived the Connecticut families’ right to collect their 95% of the cash the Onion put down. So the billion-dollar debt was only reduced by about a million five, roughly a third of what the FUAC offer would cut off that mountain. That provides less relief to the debtor, which is one of the trustee’s goals.

There are answers to that problem; Liz Dye remembers that the trustee testified that the families agreed to write down their share of the debt to make it a clean $7 million reduction in indebtedness. (I don’t recall that, but I was teaching, eating, napping, and/or debating Battletech with my son during parts of the hearing.) Even if there wasn’t a clean agreement on that, the court could simply have required the Connecticut families to make such an agreement as a condition of the sale. And in any event, the difference in relief to the debtor between $1ish and $3ish million is negligible when the total debt is $1ish billion. The trustee can weigh that against the much greater relief to the creditors when the holders of 95% of the debt propose and authorize a non-cash solution that benefits all the other creditors as well—trustees have wide discretion, as discussed below.

Update: the proposed sale order did in fact specify that the GT bid would reduce the estate’s indebtedness by the full $7 million, making the case for accepting that bid even stronger.

And the judge, like commenters, really glossed over that issue. In general, his biggest concerns were the procedural kinks and the confusion around the sale, as well as his belief that the trustee “left the potential for a lot of money on the table” by not leveraging one bidder against the other.

I don’t know where he’s getting that from. The bidders made their best offers; Lopez thinks they would have stretched further and dug deeper if they’d known what the other bids were, but there’s no evidence for that. If FUAC has suggested they had the power to make a higher bid, I haven’t seen it. So we’re left with two competing opinions: the trustee thinks he did his job properly, maximizing the value of the assets in a creative way that the owners of >95% of Jones’s debt approve of. The judge disagrees, because he has unformed intuitions about it being possible to get more money for sets of assets he can’t definitively value or identify.

The Business Judgment Rule

This isn’t a new problem in law. Judges have the power to judge, but not necessarily the insight or experience. In business, the most famous place this comes up is when corporate directors make decisions that negatively affect the shareholders. The shareholders often want to sue the directors, asking a judge to second-guess those decisions. But judges aren’t businesspeople, and aren’t necessarily qualified to do so. And if the directors knew they could be liable just because a judge would have done things differently in their shoes, prudent people wouldn’t become directors anymore. That would be a rather large problem for an economy build on companies with good boards of directors.

So we evolved the Business Judgment Rule. The BJR basically (again, oversimplification) says that judges aren’t supposed to second-guess decisions. They won’t hold directors liable for decisions they make, even if they turn out to be mistaken, as long as the director acted in good faith, was reasonably prudent, and was reasonably loyal to the corporation’s best interests. There are ways to defeat the BJR—Elon Musk has stumbled into one or two, the way Captain Renault stumbled into gambling—but they usually fail, even with expensive lawyers jackhammering away at it.

This was not a corporate directors case. But trustees get generally the same benefit of the doubt. (At least, I think so. Here is where I admit, long past the point at which many of my professional peers have stopped reading, that I’m not a bankruptcy expert. I maintain that I am still an expert lawyer, negotiator, engineer, scientist, dancer, astronaut and oral surgeon.) In other words, the court should not have been asking, “What would I have done if I were picking the winning bidder?" Rather, it should have been asking, “Was the trustee acting in bad faith?”

We don’t have to guess about the answer! Lopez explained repeatedly—really, repeating himself over and over again in a very poorly structured oral ruling—that the trustee did not act in bad faith. He just felt, on the basis of his intuition, that the trustee could have squeezed more money out of the Infowars assets.

This is exactly the kind of second-guessing the BJR is designed to prevent. The judge does not know better than the trustee, despite two days of hearings. The judge is not better-placed to decide how to dispose of the assets. The judge has the power to decide the case, but not superior insight or judgment. The BJR honors that fact, when it is observed.

The BJR may not apply here, or may have exceptions I’m not aware of. I can’t say that the judge’s decision was necessarily an abuse of his discretion. But it was certainly disappointing and a betrayal of the trust that trustees deserve and need to do their job effectively. Lopez’s stuttering insistence that he didn’t mean to call the trustee’s judgment into doubt betrays his awareness that that is exactly what he was doing.

It gets worse

Critics of Alex Jones have been excoriating Judge Lopez since the bankruptcy began, pointing to some legitimate complaints about him. Jones handpicked him, judge-shopping to make sure Lopez would draw the case. Lopez has moved slowly, and at times confused the parties about what comes next. Many of the criticisms are based in ignorance about how the legal system works (griping that the judge should simply reject Alex Jones’s motions because Jones is a villain) or their own conspiracy theories (Lopez is in Jones’s employ). But clearly a lot of that criticism has been better-founded than I gave it credit for.

The oral ruling was baffling. Multiple practitioners commenting on the case, in comments to me personally, agreed on one thing: no one knows what the hell is supposed to happen next. Lopez gave the trustee thirty days to straighten things out, but how? The judge said he doesn’t want another auction, but may want the equity sold, but also there are liens to be resolved, but also there’s an adversarial proceeding down the road, and maybe a deal is possible with the Texas plaintiffs, etc. Some of these directives (suggestions? jokes?) are flatly irreconcilable. Some are objectionable; the liens are held largely by Alex Jones’s own father, as part of a relatively transparent effort to divert assets from the bankruptcy estate. The court will presumably get around to dealing with that, but evidently not in our lifetimes.

Courts don’t just make decisions for the sake of making decisions. They resolve disputes. A good court does work, untangling the confusing and straightening the crooked. This court did the opposite. There were real, legitimate questions to be answered about the bidding process, which was imperfect. But imperfect doesn’t mean bad, and it certainly doesn’t mean the sale should be quashed. The trustee managed a sale process that resulted in a brilliant, effective, and humane deal that reduced Jones’s indebtedness and satisfied the holders of the vast majority of his debt. The real and important outstanding questions (primarily exactly how much of that debt was being forgiven, as I understand it) could have been resolved at this hearing quickly and simply.

Instead, the judge tore up an effective sale process and left the parties and the public in confusion. The judge should be ashamed of the negative work he’s done today. Even if his judgment was legally permissible, it flies in the face of the principles animating the BJR. And by substituting his intuitions for the trustee’s good-faith judgments, he’s created confusion and delay where there could have been certainty, progress, and the beginning of a real resolution to a years-long morass.

There are other questions that trouble me that should be of less concern for the judge. The judge should not take into account that Jones is a villain; the law protects villains. But we’re free to point it out, and be furious that (yet again) a goon and vicious liar profits by his evil. Jones is the primary beneficiary here. The pill empire keeps rolling undisturbed, he keeps pushing bad products and disgusting lies on the public, and he will, of course, use this to further his own narrative of grandeur.

I’m also frustrated that Jones’s lawyers pulled out a win despite being absolute jackasses in court. There was little that a layperson would respond to—no threats to the witnesses or anything remotely sanctionable—but the primary lawyers for FUAC and Jones personally disgraced themselves as professionals. They took shots at the families of the Sandy Hook victims, and even fished for conspiracy theories to use against them in a way that I’m certain Jones will pick up on in the future. The judge was clearly unimpressed by their bumbling antics—at one point objecting himself when the FUAC lawyer petulantly insisted that the Sandy Hook families “gave in to their hatred of Alex Jones.” Absolutely risible.

What’s next?

Who knows. Literally, who knows? I don’t. Other onlookers don’t. I doubt the trustees or parties do. We may see a settlement this week that moots the question, or an appeal that kicks it up the ladder, or a motion for clarification that gives the judge an opportunity to provide some guidance, or a written ruling that does it sua sponte.

In the meantime, Jones will boast about the outcome and make a lot of money, some of which will eventually make its way to the families he tortured. But most of it, for now, will go to the lawyers who have spent the last two weeks fighting over this mess and are only really beginning their work. The money for many of those lawyers’ fees comes from the bankruptcy estate, meaning it comes from the creditors—the Sandy Hook families—ultimately. I’m very, very skeptical that whatever happens next will reward the judge’s optimism and make more money for those families than has been wasted on fees.

But we’ll find out together. Possibly around Christmas 2025.