Should You Crowdfund Your Case?
The new trend in litigation funding has its advantages—and its risks.
June 02, 2015 at 12:35 PM
7 minute read
The original version of this story was published on The Recorder
In the past decade, crowdfunding entities like Kickstarter have emerged as the go-to resource for anyone who needs to raise money for a pet project, a charity cause or to grow a start-up company. If an aspiring filmmaker wants to fund a short film, there are multiple crowdfunding websites that can take an idea and within hours, get it green-lit after investors around the world offer to chip in to make the film. From honeymoons to the world's best potato salad, it seems any goal can be achieved via the crowdfunding platform.
Unsurprisingly, the genius of crowdfunding has finally reached the legal market. In just the past couple of years, websites have launched providing a crowdfunding platform for litigation funding. These various companies exist to help cash-strapped plaintiffs who have potentially lucrative cases against large entities or, on the flip side, smaller companies being sued by Goliath-type competitors, connect with able investors to support the inevitable costs of bringing a lawsuit.
|Meeting the Minimums
For example, one litigation crowdfunding website, LexShares, looks for solely commercial cases already filed that need between $100,000 and $1 million in capital. The company helps attorneys determine how much funding is needed based on the case's details. The case types LexShares helps fund range from antitrust, to intellectual property, to shareholder suits, among others. LexShares then posts the offering on the website with certain case details, funding goal, and deadline.
Notably, LexShares requires investors to meet certain income requirements and FTC guidelines before being allowed to invest in cases. Plaintiffs also have the option to reveal the details of their case by “request only,” thus allowing plaintiffs to pick and choose which investors can see and invest in their case. Investors can then track the case and expect a healthy return on their investment when the lawsuit ends on a positive note. In the end, LexShares takes a carried interest in each case funded, with no upfront or management fees for investors.
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View All
Trending Stories
Who Got The Work
Dechert partners Andrew J. Levander, Angela M. Liu and Neil A. Steiner have stepped in to defend Arbor Realty Trust and certain executives in a pending securities class action. The complaint, filed July 31 in New York Eastern District Court by Levi & Korsinsky, contends that the defendants concealed a 'toxic' mobile home portfolio, vastly overstated collateral in regards to the company's loans and failed to disclose an investigation of the company by the FBI. The case, assigned to U.S. District Judge Pamela K. Chen, is 1:24-cv-05347, Martin v. Arbor Realty Trust, Inc. et al.
Who Got The Work
Arthur G. Jakoby, Ryan Feeney and Maxim M.L. Nowak from Herrick Feinstein have stepped in to defend Charles Dilluvio and Seacor Capital in a pending securities lawsuit. The complaint, filed Sept. 30 in New York Southern District Court by the Securities and Exchange Commission, accuses the defendants of using consulting agreements, attorney opinion letters and other mechanisms to skirt regulations limiting stock sales by affiliate companies and allowing the defendants to unlawfully profit from sales of Enzolytics stock. The case, assigned to U.S. District Judge Andrew L. Carter Jr., is 1:24-cv-07362, Securities and Exchange Commission v. Zhabilov et al.
Who Got The Work
Clark Hill members Vincent Roskovensky and Kevin B. Watson have entered appearances for Architectural Steel and Associated Products in a pending environmental lawsuit. The complaint, filed Aug. 27 in Pennsylvania Eastern District Court by Brodsky & Smith on behalf of Hung Trinh, accuses the defendant of discharging polluted stormwater from its steel facility without a permit in violation of the Clean Water Act. The case, assigned to U.S. District Judge Gerald J. Pappert, is 2:24-cv-04490, Trinh v. Architectural Steel And Associated Products, Inc.
Who Got The Work
Michael R. Yellin of Cole Schotz has entered an appearance for S2 d/b/a the Shoe Surgeon, Dominic Chambrone a/k/a Dominic Ciambrone and other defendants in a pending trademark infringement lawsuit. The case, filed July 15 in New York Southern District Court by DLA Piper on behalf of Nike, seeks to enjoin Ciambrone and the other defendants in their attempts to build an 'entire multifaceted' retail empire through their unauthorized use of Nike’s trademark rights. The case, assigned to U.S. District Judge Naomi Reice Buchwald, is 1:24-cv-05307, Nike Inc. v. S2, Inc. et al.
Who Got The Work
Sullivan & Cromwell partner Adam S. Paris has entered an appearance for Orthofix Medical in a pending securities class action arising from a proposed acquisition of SeaSpine by Orthofix. The suit, filed Sept. 6 in California Southern District Court, by Girard Sharp and the Hall Firm, contends that the offering materials and related oral communications contained untrue statements of material fact. According to the complaint, the defendants made a series of misrepresentations about Orthofix’s disclosure controls and internal controls over financial reporting and ethical compliance. The case, assigned to U.S. District Judge Linda Lopez, is 3:24-cv-01593, O'Hara v. Orthofix Medical Inc. et al.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250
