On Monday, U.S. Bankruptcy Judge Christopher Lopez killed the deal to sell Infowars to The Onion. The court rejected the creatively-structured bid, which was designed to transform the platform from a vector for conspiracies and trucker speed to a humorous website funded by ads supporting gun control.
In short, the court said that The Onion’s offer was too complicated and failed to bring in enough revenue for the estate. There were too many variables, contingencies, and unknowns, and Judge Lopez ruled that the trustee failed to use appropriate business judgment, leaving money for the creditors on the table.
Conspiracy shitposter Alex Jones has spent years trying to duck accountability for defaming the families of children and teachers murdered at Sandy Hook Elementary School in 2012. His refusal to comply with discovery got him default judgments in civil suits filed in Connecticut and Texas, leading to $1.5 billion in total damage awards (later reduced to roughly $1.3 billion on appeal). For more than two years, Jones screwed around in bankruptcy, first trying to delay the trials, and then seeking to fend off the judgments.
Judge Lopez ruled that the Sandy Hook judgments were for willful torts and were thus largely non-dischargeable, and then dismissed Infowars’s parent company Free Speech Systems from Chapter 11. At that point, Jones converted his personal bankruptcy from a Chapter 11 reorganization to a Chapter 7 liquidation. The court ordered the Chapter 7 Trustee, Christopher Murray, to sell off Jones’s assets, including FSS, of which he was the sole owner.
The auction was scheduled for November, and there were only two serious bidders: First United American Companies LLC (FUAC), which is helmed by Charlie Cicack, one of Jones’s vendors, and which planned to keep Jones on the air; and Global Tetrahedron (GT), the parent company of The Onion, which was backed by the Sandy Hook parents.
FUAC, whose priority was purchasing the Infowars store, opened with a bid of $1.2 million. GT, which really only cared about the IP, offered $1 million. At that point, Murray and the auctioneers decided against holding an “open cry” auction, and instead invited the parties to bid on multiple lots at once, submitting a best and final offer.
As they testified, this was partly because there were multiple different groups of assets and only two bidders. But it was also necessary because the GT bid was structured as a formula, rather than an all-cash offer, and so running the numbers on it during competitive, live bidding would have been impossible.
The Connecticut plaintiffs, with their $1.3 billion judgment, dwarfed all other creditors, including the Texas plaintiffs, who are owed $50 million. The Connecticut parents are entitled to roughly 96 cents of every dollar generated by the sale, and they agreed to give some amount of the proceeds to the Texas parents, so as to make the GT deal more attractive than any competing bid up to $7 million. But that necessarily involved a set of complex calculations including the trustee’s fees, the auctioneer’s fees, and the legal fees — all of which came off the top—plus the competing bid and the creditors’ proportionate shares. And meanwhile, the Texas parents injected further uncertainty by reserving their right to get more money if an appeals court struck down enough of the Connecticut award to affect the ratio of their claims.
In the second round, GT bid $1.75 million in cash, and FUAC bid $3.5 million — a substantial increase by both bidders. Murray then declared GT the winner, since the $3.5 million was well under the $7 million threshold, and so the Connecticut parents could easily disclaim enough of their share of the proceeds to make the GT offer “better” for the Texas parents. At which point FUAC and Jones charged into court making wild claims of collusion and impropriety by Murray, GT, and the Sandy Hook parents themselves.
In 13 hours of hearings on Monday and Tuesday, the parties examined the trustee and the auctioneer. It was clear from that testimony that none of Jones and FUAC’s accusations of improper contacts were accurate — in fact Judge Lopez scolded Murray for failing to probe whether GT was willing to pay $1.75 million for the IP alone (since the funding contingency relied on there being a “second” bidder), and allow FUAC to pay $3.5 million for the store. This omission, perhaps more than anything else, appears to have led the court to conclude that Murray failed to exercise appropriate business judgment and left millions of dollars on the table.
And on top of that, Murray couldn’t put final numbers on any of the variables in the GT funding formula, particularly with the meter still running as he sat there on the witness stand, increasing the administrative and legal fees coming off the top before the Texas and Connecticut parents settle up between themselves.
Most observers did not expect Judge Lopez to set aside the sale. Murray was entitled to broad deference, both by the terms of the court’s winddown order and under the business judgment rule. There’s no indication that he acted in bad faith, and the creditors were all on board. FUAC itself was fine with the BAFO round, only objecting to the change in procedure when it failed to win.
But the floating nature of GT’s bid seemed an insuperable obstacle for the court. In a rambling announcement of his decision (rendered at 10:30pm local time), Judge Lopez chastised Murray for not trying to extract more from FUAC and GT. He called the $3.5 million offer “too low,” specifically comparing it to the $50 million owed to the Texas plaintiffs. Notably, none of the creditors, including the Texas plaintiffs, objected to the GT deal. Even Alex Jones’s PQPR LLC, which purports to be owed $78 million for supplements supplied to FSS, voiced no objection. And the Connecticut plaintiffs agreed to stipulate (if belatedly) to decrease Jones’s indebtedness by $7 million, mooting his claim to have been injured by the structure of the GT deal.
And yet … here we are, with no plan for what happens next.
The court denied Jones’s motion to disqualify, along with FUAC’s request to be declared the winner of the auction. And Judge Lopez declined to order another sale, instead instructing Murray to go back to drawing board and try to work it out in the next 30 days … whatever the hell that means. The court theorized that there was money left on the table, seemingly incredulous that a business which brings in millions of dollars a month in supplement sales would fetch so little at auction. But the sale only drew two bidders, with Cicack reportedly raiding his father-in-law’s retirement fund to finance the deal. It’s hard to see how the creditors are going to be better off under some as-yet-undiscovered deal than they would have been if the auction had been ratified. The administrative and legal fees are sunk costs which ultimately come out of the creditors’ recovery, and they’re not coming back.
But it looks like The Onion hasn’t tapped out just yet.
A statement from The Onion about InfoWars. pic.twitter.com/dtiQHSZ9vj
— follow @bencollins on bluesky (@oneunderscore__) December 11, 2024
Liz Dye lives in Baltimore where she produces the Law and Chaos substack and podcast.
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