Gawker Founder in Bankruptcy After Losing Hulk Hogan Case

  • Nick Denton faces liability over wrestler’s sex-tape suit
  • Chapter 11 petition lists over $100 million in liabilities

An Inside Look at the Gawker Auction Process

Nick Denton has lost another round to Hulk Hogan.

The Gawker Media founder sought bankruptcy court protection Monday in New York, after a Florida judge refused to halt enforcement of a $140 million damages award in pro wrestler Hogan’s invasion-of-privacy lawsuit.

Gawker itself filed for bankruptcy June 10, a move that temporarily put the brakes on Hogan’s efforts to collect on the verdict he won after the online media company posted excerpts of a sex-tape featuring him. Denton was also a defendant in the suit and liable for the damages award.

Late last week, a judge in Florida gave Hogan permission to try to collect, rejecting Denton’s claims that forcing him to pay up before his court appeals ran out was a threat to freedom of the press. That ruling left Denton with little choice but to seek bankruptcy court protection.

The Chapter 11 petition filed Monday in Manhattan federal court listed assets of $10 million to $50 million and liabilities of more than $100 million, including Hogan’s claim and other pending lawsuits. Those legal claims will have a lower repayment priority than secured loans and other debts backed by collateral, such as a home mortgage.

Denton also listed more mundane debts, including a $50,000 loan he took out from his Gawker 401(k) retirement fund, $18,671 in credit card bills and $120 for cable TV.

Thiel Victory

Denton’s bankruptcy filing may be seen as a victory for Peter Thiel, the PayPal co-founder who bankrolled Hogan’s lawsuit.

According to Gawker, Thiel has had it in for the company since 2007, when it outed him as gay. Thiel, who sits on the board of Facebook Inc., has since publicly acknowledged that he’s gay and called Gawker’s now-defunct blog Valleywag the “Silicon Valley equivalent of al-Qaeda.” 

In a May New York Times interview, Thiel described his backing of Hogan and other litigants as a philanthropic way to help those who can’t afford to defend themselves against press attacks and intrusions.

For now, Hogan is unable to collect from Gawker because his claims are halted during bankruptcy. Denton would enjoy the same protection while he’s in bankruptcy. That gives the company time to challenge the sex-tape verdict. If Gawker loses on appeal, sale proceeds would go to creditors -- including Hogan, whose real name is Terry Bollea.

‘Accept Responsibility’

“The time has come for Nick Denton to accept responsibility for the decisions he made and the rewards he reaped based on the suffering and humiliation of others,” David Houston, a lawyer for Hogan, said in a statement. “His bankruptcy has nothing to do with who paid Mr. Bollea’s legal bills, and everything to do with Denton’s own choices and accountability. If even one person has been spared the humiliation that Mr. Bollea suffered, this is a victory.”

Meanwhile, Denton is helping the company prepare for an auction this month. Ziff Davis has agreed to make a lead bid of $90 million and keep Denton on. Denton has testified that 15 parties have signed nondisclosure agreements -- a sign of serious interest -- since the Ziff Davis offer was announced and that he expects active bidding.

Oxford University-educated Denton started Gawker with a single blog out of his New York apartment in 2002. In addition to its flagship news and gossip site, the company also has sites devoted to cars, sports, technology and feminism. 

Denton’s Role

“Anyone buying this business should take Nick’s role going forward seriously. They may or may not ultimately choose to keep him,” Mark Patricof, an adviser to Gawker at Houlihan Lokey Inc., said in a Bloomberg Television interview. “He’s a journalist at heart.”

To watch video, click here.

In a memo Monday, Denton praised the Gawker staff for their work, saying the company is in “amazingly robust shape” ahead of the planned sale. He remained defiant about what he called Thiel’s “legal campaign.”

“It is a personal vendetta,” he wrote in the memo, a copy of which was provided to Bloomberg. Denton said it was “disturbing to live in a world in which a billionaire can bully journalists because he didn’t like the coverage.”

Thiel didn’t return a phone call and e-mail requesting comment.

The case is In re Nicholas G.A. Denton, 16-12239, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The company’s bankruptcy is In re Gawker Media LLC, 16-11700, in the same court.

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