Jones and his company now owe an estimated $50 million in libel judgments — and possibly more in the future — to Sandy Hook Elementary School, which shot the families of victims for its lies that the 2012 shooting was a hoax.
These families, as unsecured creditors, led the call to determine whether Free Speech, through its family and friends, has established corporate structures that allow it to protect assets that might otherwise be used to pay the defamation judgment.
A judge has ordered the trustee in bankruptcy to investigate intra-family and other transactions that could affect payment to creditors. Future court rulings could wreak havoc on Jones’ quest to use bankruptcy to limit his liabilities.
The investigation “is a major inflection point in this bankruptcy case that will put the debtor on his heels and underscore that the Court is taking creditors’ concerns seriously,” said Nicholas Koffroth, bankruptcy attorney at Fox Rothschild LLP. .
Findings of fraud, dishonesty, incompetence or gross mismanagement could result in the removal of Jones’ control over the assets, a winding-up order or the dismissal of the bankruptcy filing, said Donald L. Swanson, a lawyer specializing in bankrupt and shareholder of Koley Jessen.
Small business dealings and relationships with close insiders are not unusual. But Free Speech’s finances should be probed amid concerns over the “lack of candor” of some of its former advisers, Texas bankruptcy judge Christopher M. Lopez said last week while ordering Melissa Haselden, subchapter V administrator, to investigate the debtor.
Jones, who through a separate entity invited an investigation into Free Speech’s finances before Lopez ordered the investigation, said in a statement to Bloomberg Law that allegations of “side deals” with certain companies are “100% fake”.
“I filed Free Speech Systems for bankruptcy so the truth about our financial situation could be known to the courts and to the American people,” Jones said. “The establishment press and plaintiff’s attorneys have continued to systematically lie at every turn about how much money we have and our business practices.”
One of the key relationships Haselden will examine is Free Speech’s relationship with PQPR Holdings Limited LLC, a dietary supplement supplier owned by Jones and his parents, David Jones and Carol Jones, through affiliated entities, according to documents filed by the court.
Free Speech says it owes about $54 million in allegedly secured debt to PQPR. Dietary supplements and other products that PQPR purchases from vendors are then sold to Free Speech for resale on the Infowars website.
If this debt proves to be valid and secured, PQPR would be among the first to be paid under a bankruptcy plan, ahead of the Sandy Hook families.
Jones’ parents could not be reached for comment.
“Just because the debtor calls the debt collateral doesn’t mean it really is,” said Melanie Cyganowski, a former bankruptcy judge now at law firm Otterbourg PC.
MRJR Holdings LLC, a company controlled by Jones’ sister Marleigh Jones Rivera, is also a listed unsecured creditor in the case.
Free speech was listed in court filings for $84,000 in claims against the Nevada-based MRJR. Before the bankruptcy, Free Speech also paid about $240,000 to the MRJR for consulting services, according to court records.
Rivera could not be reached for comment.
Sell food supplements
Anthony Gucciardi, former collaborator of Infowars, is also in the case.
Gucciardi owns a company, Auriam Services LLC, based in Austin, which facilitates credit card services that Free Speech uses on its websites, Auriam attorney Lynn Butler of Husch Blackwell LLP told Bloomberg Law.
Free Speech paid the processor a fee of at least 4% of the total amount of all credit card charges processed under the agreement, as well as reimbursement for all charges incurred, according to court records.
The trustee will investigate Free Speech’s deal with a credit card processor, whose name was redacted in the financial disclosures. But the processor address uses the same PO Box as PQPR.
“Mr. Gucciardi has been in the dietary supplement business for years,” Butler wrote in an email. There is no informal relationship with FSS or any business related to Alex Jones other than Auriam’s financial services contract with FSS.
Free Speech’s ties extend to Jones’ personal trainer. Patrick Riley – who said he trained Jones and Jones’ father and worked for Free Speech – recently started operating Blue Asension Logistics LLC to take on fulfillment logistics work for Free Speech. In August, Jones agreed to send $400,000 to Blue Asension to clear up backlogs, Riley said.
The bankruptcy judge also assigned Haselden to investigate about $62 million withdrawn by Free Speech “members,” according to the disclosures. The only member of the company is Jones.
“If proven, it could bring significant sums into the bankruptcy for distribution to uninitiated creditors,” Cyganowski said.
Creditors have questioned freedom of speech over reports that Jones recently collected millions of dollars in cryptocurrency donations. Jones recently testified in Connecticut state court that he received approximately $9 million worth of cryptocurrency in his personal cryptocurrency wallet through donations solicited from Infowars.
All but about $60,000 of that cryptocurrency went back into free speech to shore up the business, Jones said.
The court found no wrongdoing in Free Speech’s dealings or dealings. But the amount of “potentially incurable conflicts of interest” subjects them to scrutiny, said Alan Rosenberg of Markowitz Ringel Trusty & Hartog PA.
The law does not prevent a debtor from engaging in business with friends or family, but it is “unrealistic” to expect the debtor to impartially investigate potential wrongdoing within his or her own family and social circle, Rosenberg said.
“If there is a legal basis to avoid PQPR’s claim, can we really expect the Alex Jones/Free Speech Systems to pursue it?” says Rosenberg. “Of course not – and this is not specific to Alex Jones or Free Speech Systems. These types of conflicts arise in many cases.
To contact the reporter on this story: James Nani in New York at [email protected]
More stories like this are available at bloomberg.com