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A federal bankruptcy court has rejected a deal that would have cleared the way for a second attempt to auction off Infowars conspiracist Alex Jones' media company. 

The decision Wednesday is yet another temporary reprieve for Jones, who is trying to maintain the perch and the audience he's built up over decades. It's also a further delay for Sandy Hook families seeking to collect any of the $1.3 billion in damages they won after suing Jones for defamation nearly seven years ago.

The families said Jones' conspiracy theories that the 2012 shooting at Sandy Hook Elementary School in Newtown, Conn., never happened and that 26 children and educators weren't killed prompted his followers to stalk, harass and threaten them for years. 

Some families sued for defamation in Connecticut, others in Texas. After Jones refused to cooperate at trial, judges in each state found him liable by default. The massive jury decisions drove Jones and his company to file for bankruptcy.

Judge Christopher Lopez shut down any arguments from lawyers at the start of what was expected to be a daylong hearing Wednesday in Houston. He immediately ruled that he cannot approve the deal because it relates to assets of Infowars' parent company, Free Speech Systems, which is no longer in bankruptcy. The judge is overseeing Jones' 

 bankruptcy, and he said approving the proposed deal would require him to overstep his authority.

"All bankruptcy lawyers know that I can't do that," Lopez said. "There's no bankruptcy to allow a claim against. […] That case is closed."

His decision suggests that the bankruptcy auction can sell only Jones' ownership stake in Free Speech Systems, and not any of the FSS assets that were listed for sale in the first bankruptcy auction, such as Infowars' recording equipment, domain names and its vitamin and supplement online store.

"I'm not allowing a sale of the assets anymore," the judge said, only a "pure sale of the equity."

That is a reversal from the judge's previous position that FSS assets fall under the control of the bankruptcy trustee, and is heightening frustration and confusion among those involved. It remains unclear how much bidders may be willing to pay for only the "equity" of a company facing massive judgments. And it seems to be inviting attorneys to try to seize assets through state courts, even though Judge Lopez sternly put a stop to such efforts last summer.

The judge also said on Wednesday he would not approve another auction bid containing a noncash component like the one the Connecticut families submitted in the last auction.

In that deal, the satirical site The Onion, in conjunction with the families, offered half as much in cash as the only other bidder, First United American Companies, which is affiliated with Jones and his online store. But The Onion bid also included a sweetener — the Connecticut families would forgo some of their proceeds in order to raise the amount that other creditors, including the Texas families, could collect.

In December, the judge ultimately blocked that sale, saying both bids were too low, and citing other concerns, including that the Onion offer amounted to a "contingency bid" that was not allowed under the auction rules.

Since then, FUAC was planning to more than double its offer to $8 million, and The Onion was also expected to significantly increase its bid, and to include a sweetener similar to the last one.

But the judge ruled that out on Wednesday, saying he wants the case to "get back on track" with a more simple deal.

"I was asked to approve a sale that had a contingency clearly in it but was told to act like there wasn't a contingency," Lopez said. "I don't want any more contingencies. If there's going to be a sale of assets, cash will be king."

That decision leaves the families unsure how best to recover their damages, and whether they have any other way to help boost The Onion's bid to turn Infowars into a parody of itself and to advocate for measures aimed at curbing gun violence.

The Connecticut families have long said they are less interested in any financial windfall than they are in shutting down Infowars and stopping Jones from continuing to spew the kind of conspiracy theories that harmed them. The families that filed suit in Texas have been more inclined to take their compensation and have some modicum of closure.

Under the settlement rejected Wednesday, the Texas families would have started getting payouts almost immediately. It also would have set how the families would divvy up proceeds from the sale: 25% for the smaller group that sued in Texas and 75% for the group that filed in Connecticut.

Before the auction, attorneys for the families had said the sale was bringing them "closer to their goal of holding [Jones] accountable for the harm he has caused."

The lawyers declined to comment immediately after the judge's ruling Wednesday.

Jones hailed the decision on his live show Wednesday, saying the "judge completely devastated" the forces trying to bring him down, quickly pivoting to tell his followers to buy his products.

"It takes a lot of money to fight these people," he said. "Now we're at the thick of the battle. … I need you to back me."

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Tovia Smith

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The ruling by a U.S. bankruptcy judge in Houston further complicates how and when Jones' bankruptcy case will be resolved and when the families he defamed will be paid.

Judge denies Sandy Hook families' deal for a new auction of Alex Jones' Infowars

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