By Dietrich Knauth
NEW YORK (Reuters) -The families of Sandy Hook shooting victims said they had a strong case to reverse payments received by Alex Jones' wife and others in his family to help satisfy $1.5 billion in judgments they won against the bankrupt right wing conspiracy theorist over his lies about the 2012 elementary school massacre.
Jones has engaged in "financial gymnastics" to hide his assets and avoid paying the judgments, spreading money to friends, family members, and shell companies, David Zensky, a lawyer for the families, said on Friday during a bankruptcy court hearing in Houston.
The families of the children killed by a gunman in Newtown, Connecticut, have a "very strong case" to claw back certain payments to Jones' family, including a $1 million payment from Jones to his wife, Zensky said.
U.S. bankruptcy law allows debtors or their creditors to unwind asset transfers that were made before bankruptcy in an attempt to avoid paying debts.
The Sandy Hook families have investigated $62 million that Jones has transferred out of his company, Free Speech Systems (FSS), and they accuse Jones of beginning to shift more money to friends and family members as the defamation cases neared trial.
Jones' attorney, Vickie Driver, said Jones was not opposed to reversing payments if they were proven to be improper, but he would prefer to appoint an independent expert for that work.
"You can imagine that if someone was to sue their wife over transfers, that's a little hard in the home," Driver said.
The families have accused Jones and FSS of profiting off lies about the shooting for years and sued him for defamation. They have won about $1.5 billion in two trials so far. Jones and his company filed for bankruptcy protection in December and July of last year.
Jones had claimed the killing of 20 students and six staff members in the December 2012 shooting was staged with actors as part of a government plot to seize Americans' guns. Jones has since acknowledged the shooting occurred.
U.S. Bankruptcy Judge Christopher Lopez, who is overseeing the bankruptcies, said Jones and the Sandy Hook families should make one last effort to reach a settlement.
"It's time for everyone to put their cards on the table," said Lopez, who set a July 21 deadline for mediation.
In addition to clawing back payments to insiders, the Sandy Hook families are also seeking a ruling that Jones cannot use bankruptcy to escape the defamation verdicts.
(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Grant McCool)