By Dietrich Knauth
NEW YORK (Reuters) -A losing bidder connected to conspiracy theorist Alex Jones challenged on Monday the Onion's purchase of Jones' Infowars website, saying the parody news site won a rigged bankruptcy auction and offered half as much cash as its bid.
First American United Companies, which is affiliated with Jones' dietary supplements businesses, asked U.S. Bankruptcy Judge Christopher Lopez in Houston to disqualify the bid by the Onion and name its own $3.5-million bid as the winner.
Jones was forced to auction his assets, including Infowars, in bankruptcy, after courts ordered him to pay $1.5 billion for defaming the families of 20 students and six staff members killed in the 2012 massacre at Sandy Hook Elementary School in Newtown, Connecticut, by making false claims that the shooting was staged.
First American United Companies said in a court filing that a court-appointed bankruptcy trustee mishandled the auction by giving the Onion credit for backing by the families of Sandy Hook shooting victims, whose lawsuits drove Jones into bankruptcy in 2022.
"Its effect is to depress and lower the amount the Onion would need to bid in cash to ensure that it was the winning bid," First American United Companies said in its objection. "This was not simply collaboration, this was outright collusive bid rigging."
The Onion's winning bid for Infowars included $1.75 million in cash, according to the objection.
Christopher Murray, the bankruptcy trustee charged with selling Jones' assets, said in a court response on Monday that First United American Companies' objection was "a disappointed bidder's improper attempt to influence an otherwise fair and open auction process." Murray said his team would not be bullied into accepting an "inferior bid."
The Onion's bid was valued at $7 million, in large part because a majority of the Sandy Hook families agreed to accept a percentage of future revenues from the new Infowars instead of taking an up-front payment from the sale, according to Murray.
The Onion did not immediately respond to a request for comment. A representative for some of the Sandy Hook families declined to comment.
The Onion announced on Thursday it won a bankruptcy auction for Infowars' assets, and pledged to replace the website's "relentless barrage of disinformation" with the Onion's "noticeably less hateful disinformation."
Lopez, who is overseeing the bankruptcy, said at a court hearing on Thursday that he had concerns about the auction's transparency. The judge said he will schedule a further hearing to gather more information and consider whether to approve the sale.
Infowars was briefly shut down after the sale was announced, but was back online within a day. Murray had said at Thursday's hearing that he shut down the business to ensure that its assets were not damaged or taken before the property could be transferred to the Onion.
If the sale is approved, the Onion would acquire Infowars' intellectual property, including its website, customer lists and inventory, certain social media accounts and production equipment.
The Connecticut-based families of the Sandy Hook shooting victims said they agreed to forgo some payment from the defamation judgments to boost the Onion's bid and prevent other right-wing content creators from continuing to promote conspiracy theories on Infowars. Other families who have sued Jones in Texas - some of whom have not yet gone to trial - did not agree to forgo payment from the Onion's bid.
Jones claimed for years that the massacre was a hoax staged with actors as part of a government plot to seize Americans' guns. He has since acknowledged the shooting occurred, but the families, who said Jones cashed in for years off his lies, sued him for defamation.
Courts in Connecticut and Texas have ruled that Jones intentionally defamed the families. Lopez previously ruled that those judgments could not be legally discharged in bankruptcy, meaning that Jones remains on the hook for most of the judgments even after Infowars is sold.