On November 19 2014, New York based company LexShares launched a new crowdfunding service that lets accredited investors fund U.S. litigations for a minimum stake of $2,500. This platform is looking to shake up the $200 billion dollar U.S. litigation market, one that is “currently undercapitalized, which allows investors to be highly selective with investment opportunities,” as their website points out.
LexShares’ two co-founders are Jay Greenberg (previously part of Deutsche Bank’s technology investment group) and Max Volsky (attorney, expert in lawsuit funding, and author of Investing in Justice). They recently received an undisclosed amount of seed funding through Atlas Venture.
When it comes to commercial lawsuits, Volsky says:
“Financing is key to the success of a lawsuit. Large companies often have an unfair advantage because they have virtually unlimited access to legal resources that individuals or smaller companies do not.”
Investing in commercial lawsuits is not a new practice, but the creators of this platform believe they can assist in evening out the playing field between large wealthy companies and smaller ones who often don’t have the resources to win even if they have a good case.
The Litigation Finance 101 section of LexShare’s website explains:
“The capital provided by monetizing a legal claim may directly pay for some of the costs of litigation, including attorneys’ fees, expert witness fees and court expenses. Litigation finance may be used to fund working capital for companies involved in litigation or even help business owners pay for personal expenses.”
Greenberg notes that part of their mission is to inform people of the opportunities that this market presents, explaining, “There’s really an education gap. Investors don’t know this is an asset class they can invest in, attorneys aren’t sure how it works, and plaintiffs don’t realize it’s available.” LexShares aims to help change this and make the practice more common.
While most traditional lawsuit investments are for cases looking to raise upwards of three million, LexShares seeks funding for cases in the $100,000 to one million range. All cases are vetted by a team of legal professionals before being posted on the site for enhanced security.
Their platform is set up so that plaintiffs may reveal as much information as they are comfortable with about their case (making privacy an important feature), while investors are given details about the legal team and may track the case though progress reports and court files as it plays out.
The offerings on LexShares are made through WealthForge LLC, a registered broker-dealer. Cases that are won are paid out in approximately five years (less than an average venture investment), while investors forfeit the funding for cases that lose.
