By Dietrich Knauth

NEW YORK (Reuters) -A U.S. bankruptcy judge on Friday ordered a court-supervised liquidation of conspiracy theorist Alex Jones’ personal assets, but he dismissed the bankruptcy of Jones’ company Free Speech Systems without ordering it to be liquidated.

U.S. Bankruptcy Judge Christopher Lopez appointed a Chapter 7 trustee to sell Jones’ assets, including his ownership stake in Free Speech Systems, the parent company of his Infowars website. Proceeds would go to pay Jones’ creditors, relatives of 20 students and six staff members killed in the 2012 mass shooting at Sandy Hook Elementary School in Newtown, Connecticut.

But Lopez declined to force Infowars itself into a separate liquidation, instead saying at a court hearing in Houston, Texas that Jones could continue to run the company until the trustee sells his ownership stake.

Lopez rejected an argument by some of the Sandy Hook families that Jones should not be allowed to regain control of his company. The judge said the bankruptcy court’s supervision had never impacted Jones’ broadcasts.

“There’s been lots of talk about whether Mr Jones has regained control of the business, but the reality is he never really lost it,” Lopez said.

The split ruling will mean further litigation between Jones, his company, and the Sandy Hook families, including battles over $6 million in cash held by Free Speech Systems. The families also will continue trying to collect money that Jones kept from them by sending it to his wife and father and close associates.

The proposed liquidation of Free Speech Systems split the Sandy Hook families. Families who sued Jones in Connecticut argued that an immediate shutdown would prevent him from hiding the company’s cash or working to undermine the company from the inside. Families who sued Jones in Texas argued instead that he would pay more in the long run if he kept control of his business instead of “selling it for scraps.”

“You can’t control Alex Jones,” said Avi Moshenberg, an attorney for the Texas families. “What you can do, what the law allows, is to make Alex Jones and Free Speech Systems pay on the judgments that were rendered by juries.”

Jones’ attorney, Vickie Driver, said the Connecticut families wanted to override Jones’ First Amendment right to free speech. Even forcing Infowars into liquidation “doesn’t stop Mr. Jones from saying what he wants, when he wants, on his broadcast,” Driver said in court.

Chris Mattei, an attorney for the Connecticut families, said after the ruling that it was a “good day,” and said that Infowars is “soon-to-be defunct.”

“Alex Jones is neither a martyr nor a victim,” Mattei said. “He is the perpetrator of the worst defamation in American history.”

Lopez appeared to fight back tears at one point in his ruling, after pointing out the painful irony of deciding the fate of Infowars just before Father’s Day. Lopez said he “had no words” to describe the pain of losing a child.

“I wish I would have picked a better day,” Lopez said.

Lopez deferred decisions on some demands by the Sandy Hook families, who have sought control over Jones’ social media accounts and the ability to choose the trustee who will be responsible for collecting assets from Jones to pay some of the $1.5 billion in defamation judgments that courts have awarded to the families. Those decisions can be made later, Lopez said.

Jones filed bankruptcy protection 17 months ago, but he was unable to reach a settlement that would reduce the $1.5 billion he owes to the Sandy Hook families after courts in Connecticut and Texas ruled that he defamed them with repeated false statements about the massacre.

Jones claimed for years that the Sandy Hook killings were staged with actors as part of a government plot to seize Americans’ guns. Jones has since acknowledged that the shooting occurred.

The judge overseeing Jones’ bankruptcy has ruled that most of the debt will survive after a liquidation, because it resulted from “willful and malicious” conduct.

(Reporting by Dietrich Knauth; Editing by David Gregorio and Alexia Garamfalvi)

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