The Onion’s Infowars Bid Teed Up for Bankruptcy Court Scrutiny

An offer by The Onion and families of the Sandy Hook Elementary School shooting victims to buy right-wing provocateur Alex Jones’ Infowars platform will face court scrutiny over the auction’s transparency and the unusual structure of the winning bid.

The core of the dispute is whether a losing bidder and Jones himself have valid complaints about the legitimacy of The Onion’s offer and the sealed-bid auction process, which was conducted in the Texas bankruptcy court where Jones is in Chapter 7.

The circumstances of the sale are different than a typical bankruptcy court auction due to the nature of the debt, which stems from approximately $1.5 billion in judgments that Jones and his company owe the Sandy Hook families related to his false statements that the 2012 massacre was a hoax.

The unconventional structure of the offer, in which the families who signed on to the deal have agreed to reduce their own claims, put an otherwise-lower cash bid over the top to become the winner. However, the deal could win bankruptcy court approval if the judge overseeing the matter decides it’s in the best business judgment of creditors—who, in this case, are the Sandy Hook families.

“We’re going through the standard processes of bankruptcy court,” The Onion CEO Ben Collins told Bloomberg Law. “In our view there’s not really been a wrench here. So we’re just excited to get it done and move forward.”

Business Judgment

Christopher Murray, the trustee tasked with overseeing the liquidation of Jones’ estate in bankruptcy, didn’t hold a traditional auction where parties bid in real time and consider the last highest offer. Murray said the initial sealed bids covered overlapping but different lots of assets.

Interested bidders typically want insight into competing bids, but it’ll be up to the court to decide if there were larger problems with the sealed bid process, said Lathrop GPM LLP partner Monique Jewett-Brewster.

“Ultimately, it’s whether the court is going to defer to the trustee’s business judgment because it’s the trustee that’s in the best position to decide which bid is of the highest value that’s better for the estate—not the necessarily the highest monetary bid,” Jewett-Brewster said.

The Onion parent Global Tetrahedron LLC valued its final bid, which included $1.75 million in cash and the Sandy Hook families’ waiver of their claims, at more than $7 million. With the families holding about $1.5 billion in claims—about 96.7% of all liquidated claims—the trustee said other creditors would receive a pool of nearly $210,000 under the winning bid. Under a backup offer, other creditors would receive only about $94,000, he said.

Other creditors include additional Sandy Hook victims’ families who aren’t part of The Onion bid and a dietary supplement provider controlled by Jones and his family.

The sealed bid structure led to protests from backup bidder First United American Cos. LLC, which operates the website for online supplement store ShopAlexJones.com. An attorney for First United, Walter Cicack of Hawash Cicack & Gaston LLP, didn’t respond to a request for comment.

Jones, who sued the Sandy Hook families, the trustee, and Global Tetrahedron on Monday over the process, also wants First United to be designated the winner.

‘Unusual’

At a Nov. 15 emergency hearing held at First United’s request, Judge Christopher M. Lopez expressed concerns with the transparency of the sale process.

Richard B. Maltz, CEO of Maltz Auctions Inc., which wasn’t involved in the auction, told Bloomberg Law that whenever his firm handles an auction for unique assets where a sealed bid auction makes sense, it generally suggests that it be followed by a round of live bidding that may be limited to a number of qualified bidders.

“I would say all of this is unusual,” Jones’ lawyer Vickie Driver of Elliott, Thomason & Gibson LLP told Bloomberg Law in an email. “But when people in a bankruptcy are motivated by non monetary desires but using monetary claims to achieve them, everything is unusual.”

The Onion wants to launch a new Infowars platform in conjunction with Everytown for Gun Safety by January 2025. Everytown for Gun Safety, which advocates gun-safety measures, is backed by Michael Bloomberg. Bloomberg Law is operated by entities controlled by Michael Bloomberg.

First United on Monday argued that the Onion’s bid included “impermissible formulas and contingencies.” The company’s own bid included $3.5 million in cash.

The trustee responded that First United’s complaints came out of disappointment that it lost. The trustee in court papers said his business judgment is entitled to “substantial deference” under bankruptcy law, and that he was allowed to conduct the auction the way he did as approved by the court.

Secured creditors commonly make credit bids—in which they forgive the debt they hold in exchange for equity—for assets on which they have a lien. But it’s unusual to see unsecured creditors like the Sandy Hook families effectively offer to subordinate their recovery, Jewett-Brewster said.

The offer by the Onion and the families isn’t a credit bid in the traditional sense, retired Delaware bankruptcy judge Christopher S. Sontchi said.

“I am sure the support of the families is that way because you really can’t credit bid an unsecured claim,” Sontchi said. “At least not easily and the value is small given the paltry recovery.”

Despite the unconventional sealed bid process and structure of the winning bid, the Sandy Hook families’ offer to sweeten the pot for other creditors by taking less will likely be a strong consideration for the judge, Jewett-Brewster said.

“The court is going to be listening to the largest group of creditors because they’re the ones with the most skin in the game,” she said.

The case is In re Alexander E. Jones, Bankr. S.D. Tex., No. 22-33553, 11/19/24.