Thiel's Money Can't Stop Probe of Gawker Imbroglio, Judge Rules

(Bloomberg) -- Technology investor Peter Thiel can't avoid an investigation into whether he destroyed Gawker Media LLC by buying the company's remaining assets -- which include the right to pursue lawsuits against him -- a judge ruled.

A year and a half into Gawker's bankruptcy, the company will auction the few remaining holdings left after its celebrity-gossip blog closed. The Silicon Valley entrepreneur had said he was interested in buying the rights to any claims against him, and that as a result any investigation shouldn't proceed. Thursday's ruling means he can still bid on his own liability, but scrutiny of his dealings can go on.

“We are prepared to bid, and think we would be the highest and best bidder for all the remaining assets, including the claims,” Thiel's lawyer Anthony Clark said in court.

Gawker filed for bankruptcy in 2016, blaming a $140 million invasion-of-privacy lawsuit from former pro wrestler Hulk Hogan that Thiel funded. The company accused Thiel of destroying it in revenge for a 2007 article in which it outed him as gay.

The dispute was set off when Gawker published a video of Hogan having sex with a friend's wife, and came to involve big-picture ethical questions for the digital era. Thiel argued against Gawker's invasions of privacy, calling one of its tech publications the “Silicon Valley equivalent of al-Qaeda.” Gawker argued that the billionaire bent the legal system to his own ends, threatening the freedom of speech.

Famous Clientele

The agent overseeing Gawker's wind-down has said the company wants more information about any litigation-financing agreement relating to the Hogan lawsuit and wants to know whether Thiel also funded other lawsuits against it. It seeks access to agreements between Thiel and Hogan's lawyer, Charles J. Harder, who went on to represent disgraced Hollywood mogul Harvey Weinstein.

Thiel's involvement in Gawker's demise has already put him at a disadvantage in the auction, Clark told U.S. Bankruptcy Judge Stuart Bernstein on Thursday. The company has failed to give Thiel the same access to information as other potential bidders, who are already sizing up the claims, he said.

“Those claims now are apparently being auctioned, in something of a secret Star Chamber kind of process,” said Clark. “Here, you've got someone who's got real money banging on the door and being told to go away.”

Thiel, founder of Thiel Capital LLC, was also Facebook's first investor and a co-founder of PayPal. He became a divisive figure in Silicon Valley last year thanks to his support for President Donald Trump.

Hulking Out

After Hogan's suit, Gawker filed for bankruptcy and sold most of its assets to Univision Communications Inc. for $135 million.

The company's estate has said claims against Thiel could be an asset worth tens of millions of dollars, but that further investigation is needed to determine their value. That probe is being conducted through a provision of the bankruptcy code that lets creditors call and depose witnesses to see whether they might improve their recoveries.

Hogan, as the estate's main creditor, would be benefit from whatever price is paid for the claims. But Hogan, whose real name is Terry Bollea, objected to the probe along with Thiel and Harder, according to court filings.

U.S. Bankruptcy Judge Stuart Bernstein this year allowed the probe of Thiel's role in the company's demise. Thiel protested, saying Gawker's plan to sell the claims to a third party was a surprise. The estate's administrator shot back that he shouldn't be too shocked, as Thiel had himself proposed purchasing them.

The bankruptcy is In re Gawker Media LLC, 16-11700, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net.

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Rick Green at rgreen18@bloomberg.net, Stephen Merelman, Kenneth Pringle

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