Relatives of children killed in the 2012 Sandy Hook massacre could have a harder time collecting from far-right radio host Alex Jones under the legal strategy being employed by the conspiracy theorist, Bloomberg News reported. Companies tied to Jones filed for bankruptcy on Sunday seeking special rules reserved for small business owners who have fallen on hard times. Those rules would speed up proceedings and reduce the families’ influence on the reorganization by preventing them from forming a creditors committee. Jones acknowledged in an internet broadcast that his Infowars empire is under heavy financial strain and asked listeners for money. The relatives of Sandy Hook victims won key court rulings against Jones after he called the shootings a hoax. A trial in Connecticut will eventually determine the size of the damages. He was also found liable in similar proceedings in Texas. Three entities, including one that holds the rights to the website Infowars, sought chapter 11 protection in Victoria, Texas. Each estimated liabilities of as much as $10 million, according to court filings. Jones’ main holding company, Free Speech Systems LLC, didn’t file for bankruptcy. Under small-business bankruptcy rules, known as Subchapter V, the Sandy Hook families won’t be able to join an official committee of creditors, which can have influence in major corporate cases but aren’t typically set up in Subchapter V filings. Subchapter V cases are limited to private companies that face only a few million dollars in debt, and rarely involve complicated legal disputes like whether a parent company can be shielded from lawsuits without filing for bankruptcy itself. In the Infowars bankruptcy, lawyers set up a trust that would pay people suing the companies, and Jones handed over his equity in the entities to the trust. The units in bankruptcy “have no purpose other than to hold assets which may be used by other entities” and their only liabilities are the litigation claims, according to court papers. By establishing a trust to settle legal claims in bankruptcy, Jones’s companies are following a controversial playbook used by other corporations facing significant lawsuits. Companies including opioid maker Purdue Pharma LP and youth organization Boy Scouts of America have sought chapter 11 protection to settle thousands of cases and streamline payouts to victims claiming harm. Jones put $725,000 of his own money into the trust to cover the costs of the chapter 11 filings. Additional funds, including $2 million cash, could flow into the trust as a result of the bankruptcy, according to court papers. The trust is a way to ensure litigation creditors can be paid in full, rather than get uneven payouts simply due to the timing of trials, lawyers for the companies said in court papers. Jury selection for the Texas trial is set to begin next week, while the Connecticut trial is still months away.
