Free Speech Systems LLC, the Alex JonesThe company behind Infowars filed for bankruptcy on Friday, according to federal court filings obtained by Law&Crime. The case was filed in the Victoria Division of the U.S. Bankruptcy Court for the Southern District of Texas.
The move was entirely predictable given that Jones filed documents in Connecticut state court on Friday to sue Free Speech Systems. The cross-defendant claim — a lawsuit between defendants named in a separate lawsuit — is legally related to an original lawsuit brought against Jones and several associated companies over Jones’ comments about the Sandy Elementary School massacre. Hook in Newtown, Connecticut, in 2012.
The Connecticut libel lawsuit against Jones, et al., jury selection is scheduled for next week. Meanwhile, Jones is currently on trial in a Texas state courtroom for several similar defamation lawsuits filed against him in the Lone Star State – his home turf.
The plaintiffs in the Connecticut case immediately asked a judge to dismiss the cross-defendant claim because, in their view, it was “another bad faith tactic intended to obfuscate, delay and create a false issue in this case for a new abusive trial. bankruptcy filing”.
This Friday prediction actually came true later in the day.
Free Speech Systems said in a bankruptcy filing that “its total non-contingent liquidated debts (excluding debts owed to insiders or affiliates) are less than $7,500,000, and it elects to proceed under subchapter V of chapter 11”.
Chapter 11 bankruptcies are frequently referred to as “reorganization” cases. They generally allow companies to retain control of their own operations and do not require companies to liquidate their assets.
Elsewhere, the first form filed in the case says Free Speech Systems expects to have 50 to 99 creditors. The company says it has assets of “$10,000,001 to $50 million,” but projects liabilities of “$50,000,000 to $100 million.” He further asserts that “[f]will be available for distribution to unsecured creditors.
A long list of creditors is attached; the natures of the various claims are invariably listed as “[t]commercial complaint[s],” “[l]equal costs”, “[l]complaint[s]», and — in one case — a «[p]potential lawsuit for copyright infringement. »
Bankruptcy papers suggest Free Speech Systems owes Getty Images – a stock photo company that distributes creative and editorial photos to news and media organizations – $9,201.25. The company also owes AT&T $3,973.83 for a “[u]tilities claim.
The largest unsecured claim – for $319,148.16 – is listed as being due to “Elevated Solutions Group,” a Cos Cob, Connecticut entity.
The dossier includes several financial statements for Free Speech Systems, one of which is reproduced here:
Additional documents show the millions of dollars circulating in the company’s coffers.
Another filing in the bankruptcy case explains how Free Speech Systems makes money.
The filing says Infowars.com offers vitamins, shampoo and “other health products” for purchase. It also sells “books, t-shirts and other products”.
“The vast majority of FSS’s revenue comes from sales of dietary supplements which have traditionally been supplied by PQPR Holdings Limited, LLC (“PQPR”), an affiliated entity,” the document states.
Another document attests that “the PQPR is managed by david jones», Alex’s father. “Alex Jones is not a PQPR manager.” However, in unraveling the precise ownership of the associated four-letter companies, the word “Jones” is at one point sprinkled throughout court documents without it being clear which “Jones” it is:
“FSS has a unique audience that is very loyal to Alex Jones and buys products based on Alex Jones’ credibility,” the bankruptcy filing continues. “Product sales from Infowars.com stores are an important source of revenue for FSS. Approximately 80% of FSS’s revenue comes from product sales. Of the rest, 11% historically comes from advertising and the rest from various sources. »
The finance interaction between Free Speech Systems and PQPR is described in several paragraphs:
Through its online sales channel, FSS currently sells (i) PQPR-purchased dietary supplements, (ii) FSS-purchased dietary supplements, and (i) books, DVDs, t-shirts, and clothing. other goods purchased by FSS. The allocation of proceeds from the sale of products after credit card processing fees varies depending on the category above to which the product belongs, PQPR receives a commission of ten percent of the net proceeds (the proceeds of the sale of products less processing fees, such as a fee for the market introduction of supplements and vitamins to FSS.
[ . . . ]
FSS relied on PQPR because no other provider would provide the supplements for Jones to advertise on its shows. PQPR ordered and paid for supplements, marked them up, and then sold them to FSS. Jones would advertise the supplements on his show and FSS and/or PQPR would fill orders to ship to his customers.
For non-supplements, FSS purchased the products, sold them, and fulfilled the sale through its own employees from its warehouse in Austin. Depending on whether a supplement or non-supplement was sold, FSS and PQPR split the cost of the sale according to an agreed upon formula.
After several paragraphs that explain the details of FSS’s interaction with PQPR, the filing asserts “FSS’s inability to fully pay PQPR for PQPR merchandise over several years” and states that “FSS became indebted to PQPR from a significant amount by 2020”.
The solution for FSS, according to the dossier, was as follows:
On or about August 13, 2020, the Debtor executed this promissory note in favor of PQPR for an initial principal amount of $29,588,000.00 (the “PQPR Note”). A security agreement of the same date granted PQPR a security interest in all of the debtor’s personal property, including but not limited to the debtor’s tangible and intangible property, accounts and proceeds from such property (the “PQPR security agreement”). PQPR filed a UCC-1 funding statement with the Texas Secretary of State on November 18, 2020.
“As of the date of the motion, $53,655,082.29 in principal and $11,794.19 in interest are due and payable under the PQPR Notes,” the filing states.
Free Speech Systems is asking a bankruptcy judge to allow it to use “cash collateral” to weather the situation and stay a going business.
Another filing says Jones never hired professional business managers to run Free Speech Systems, which he once co-owned with his then-wife but now owns entirely.
For example, “the 2021 ledger was not completed and the books were not closed, and almost no transactions were recorded in the 2022 ledger,” the filing claims while pointing out the lack of control and governance outside of Jones himself.
Documents filed elsewhere lament the removal of Jones’ show’s platform from many popular websites, the reluctance of credit card processors to do business with Free Speech Systems, and the impacts of Sandy Hook’s libel lawsuits on Free Speech Systems.
“The core of the allegations in these lawsuits are that Alex Jones and FSS employees said or implied that the Sandy Hook Massacre did not take place and that the parents participated in a conspiracy against the public,” asserts a record. “Following FSS’s filing for bankruptcy, litigation in Connecticut State Court was stayed by the automatic stay provision of the Bankruptcy Code.”
“Subject to court approval, I understand that the debtor intends to pay critical suppliers only to the extent necessary to preserve its business,” wrote W. Marc SchwartzChief Restructuring Officer of Free Speech Systems, LLC.
One of the documents Schwartz filed favorably cites the Southern Poverty Law Center as a source of biographical information about Jones. The filing even tells the bankruptcy court that Jones has a “large and devoted following of far-right conspiracy theorists.”
As Law&Crime reported on Friday, Sandy Hook plaintiffs suing Jones and Free Speech Systems in Connecticut asked a judge to refuse to allow Jones to sue his own company on the following grounds:
The counterclaim alleges the fiction that this wholly controlled subsidiary has promised to hold Jones harmless for damages in this case, inviting this proceeding to enter the conspiratorial world of Mr. Jones where facts found and sworn testimony mean nothing. at all. To ensure that Jones does not take advantage of this latest scheme, the counterclaim must be struck out immediately as untimely and made in bad faith. It should also be removed immediately as it is pure fiction. It takes two parties to make a contract, and here there is only one: Jones completely controls FSS.
However, Free Speech Systems filed emergency documents Friday as part of the bankruptcy proceedings to allow the ongoing lawsuit in Texas to continue unabated.
The emergency motion reads, in part, accordingly:
The Debtor requests emergency consideration of this motion no later than 8:30 a.m. on August 1, 2022, or as soon as the Court’s schedule permits. A jury has been appointed and the trial is underway in the Heslin/Lewis lawsuit, which is scheduled to continue at 9:00 a.m. on Monday, August 1, 2022. Emergency relief is needed to avoid any delay in the Heslin/Lewis lawsuit to the detriment of the Debtor, the plaintiffs Heslin and Lewis, and the members of the jury sitting in the Heslin/Lewis lawsuit.
[ . . . ]
The debtor believes that it is in the best interests of his estate and his creditors that the Heslin/Lewis lawsuit proceed to judgment despite the commencement of this Chapter 11 case. Substantial resources of the debtor and plaintiffs Heslin and Lewis have already been spent in the Heslin/Lewis lawsuit to assemble a jury and present evidence to that jury. Based on representations made by attorneys for Heslin and Lewis in the Chapter 11 matter of related party InfoW, LLC previously in this Court, Debtor believes that Heslin and Lewis seek final judgment from the State Court of Texas and would seek waiver of the automatic stay in the absence of such debtor’s request.
Many bankruptcy documents are embedded below:
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