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Commercial

CEO of Taurus Capital Discusses Litigation Funding

Elad Smadja, CEO of litigation funder Taurus Capital, explains the basics of litigation funding. Taurus is actively pursuing investments in South Africa. Below are some key takeaways from the discussion, available in full on CNBC Africa: Q: What is Litigation Funding? A: It’s a fascinating asset class. It’s non-recourse funding provided to a plaintiff in order to pursue meritorious litigation in exchange for a percentage of the claim. When you have a plaintiff who wants to sue an entity of means, like a large commercial claim or a government institution, individuals don’t often have the means to file a claim. So they approach a litigation funder who can provide funds, and in return, the funder gets a portion of any proceeds resulting from the case. The downside is that if the claim is not successful, there’s no recourse for the funder. Q: It sounds very risky to me. A: And it is. It’s either a very large payout, or it’s zero. Obviously, we do a lot of due diligence work. We approach experts, vet the legal merits. There’s a lot of expense involved in doing that. Plus financial due diligence—to ensure that the defendant can make those payments at the end of the day. When investors come into a fund, one or two losses would be sad, but hopefully, the winners will make up for it. The winners should largely outperform the losers.  Q: Who are you pitching this to? A: This is not man-on-the-street pension money. If you have a low-risk appetite, this is not for you. Q: Sounds like bitcoin. A: *laughs* I don’t want to say it’s like Bitcoin. The main selling point is the non-correlated nature of this asset class. Ultimately, other investments rely on an underlying economic climate. Funding doesn’t.  Q: What kind of time frames? These things can drag, right? A: Yes, these things can take a long time. We bake that into our equation. Large-scale litigation can take a lot of turns, it can take years and years. So it’s similar to private equity in that regard.
Commercial

1818 Venture Capital Acquires Equity Stake in Level

Level, the family law litigation funder founded in 2017, has just sold an equity stake to 1818 Venture Capital. The GBP 20 million deal is also expected to refinance Level’s revolving credit line. Global Legal Post explains that the investment in Level will accelerate its growth and expansion in a way that increases access to justice and fairness. Family law clients are becoming increasingly aware of litigation funding as an option—especially when there’s a lack of funding for proper legal advice. Litigation funding is also helpful in many types of alternative dispute resolutions. Level funds family law cases, including high net-worth divorce cases. Founder and CEO of Level, George Williamson, stated that the investment by 1818 Venture Capital is a testament to the value of Level. This highly flexible funding line will allow Level to pursue opportunities and innovation.
Commercial

LCM Reports Rise in Funding Requests

As lockdown restrictions ease up around the globe, applications for legal funding are increasing. Litigation Capital Management claims that corporate clients are applying for funding at a 68% higher rate than the same period last year. Investors.com reports that current market conditions are creating an increased demand for legal financing. Much of this is related to restructuring and insolvency. This is good news for funders like LCM, which saw a loss of $1.4 million due to court delays. That interim loss is offset by a 15% surge in cash receipts to $10.6 million. LCM asserts that its investment portfolio is 100% balance sheet funded, and now boasts nearly $100 million invested; a nearly 200% increase from the same period during the prior year. 
Commercial

Legl Funding Raises GBP 5Million

Fully digital law firms are on the way, thanks to a new B2B SaaS platform developed by Legl, a London firm. Founded by Julia Salasky in 2019, Legl focuses on law operations.

Business Cloud details that Legl has received funding from angel investors as well as from Samaipata, and First Round Capital among others.

While much legal tech focuses on the actual practice of law, Legl is making advancements in improving the client experience. Startups like Legl are a sign that advancements in legal tech are here to stay.

Commercial

London Legal Merger Creates 15 Partner Firm

Competition between law firms in London just got a little more fierce. Byrne and Partners and PCB Litigation have merged—with Burford Capital’s blessing. The deal will go live next month when PCB Litigation moves into the Byrne and Partners offices. This will result in a firm led by 15 partners. Global Legal Post details that PCB entered into a deal last year with funding giant Burford Capital, which now holds a 32% stake in the firm. The new firm stated that there is an ambitious plan for growth, part of which will involve portfolio financing. The larger goal of the legal merger is to establish a platform to grow specific portions of the practice—including arbitration, corporate crime, and insolvency claims. The firm hopes to expand its reach in Asia, the Middle East, Russia, and elsewhere. The merger is being called a ‘landmark moment’ for the firms, both of which are considered dynamic leaders in the field.
Commercial

Proposed 30% Cap on Legal Funding Returns Could Devastate Class Actions

Australia’s predilection for over-regulating litigation funders is on display again. A proposed 30% limit on gross returns to funders could devastate funding for class actions. New research from PwC’s Jeremy Thorpe suggests that even a 36% return rate for funders would fail to cover even basic legal costs. Financial Review explains that the report, which was commissioned by Omni Bridgeway, illustrates that a cap of as much as 50% could still leave funders wanting. If class actions become a losing proposition for funders, Australians in need of financial support will lose access to justice. Caps may leave some claimants receiving higher payouts. But the net loss to the public becomes apparent when viable claims that deserve adjudication cannot be pursued. Omni Bridgeway’s Andrew Sacker is adamant that caps on returns for funders would deny justice to a significant number of Australians. The firm supports a 50% cap on funder returns. Unfortunately, the Australian parliament still views the funding industry as a cynical means to profit from other’s legal woes. The proposed cap is based on allocation and proportionality, rather than a consideration of potential returns and risks. As such, funders believe it doesn’t represent a reasonable compromise.
Commercial

Alternative Investment Mania

The financial world has been on the receiving end of investor-related whimsy of late. Bizarre and unexpected high-end investments are taking financial pros by surprise. But what is driving these unusual, sometimes even hilarious, investments?

New York Times reveals that some folks are making money hand over fist during the pandemic. While many Americans struggle, others are flourishing as they seek out less traditional investments. Equity and bond investments are becoming less attractive than ever owing to market volatility and a general uncertainty surrounding the pandemic. This is the rationale behind investment in legal funding as well; not as exciting as owning a Tom Brady rookie card, perhaps, but still a worthwhile diversification play.

New tools like Robinhood and Coinbase have enabled unsophisticated retail investors to win fortunes (or perhaps lose everything). Some liken the rise of alternatives to a form of childish expression, explaining that money with nowhere to go may lead to choices that would normally be inadvisable. Robinhood is currently being accused of coaxing users toward addictive gambling behavior. So while these financial blips are interesting, most say that they don’t present any real risk to our financial system on the whole.

Some investments are related to pop culture. Sneakers, sports trading cards, NF tokens (proving the authenticity of digital goods), and outsider art are all selling for incredible sums. It’s been suggested that investments with pop culture significance can retain their value for years—with sneakers being a more stable investment than some might think.

It’s hard to predict how this boom in kitschy investments will end. It’s been suggested that as the COVID vaccines bring a return to normalcy, we could be looking at prosperity and celebration not seen in the US since the roaring ’20s. Here’s hoping the ensuing crash will be easier to weather than the last one.

Commercial

Is Kenya the Next Frontier for Litigation Funding?

The current legal climate in Kenya isn’t much different than that of the developed world. Access to justice is often limited to what the litigant can afford or raise. Those who cannot afford to fund their cases may sell off assets or crowdsource funds. But as of now, the option to seek third-party litigation funding on a non-recourse basis is not available to Kenyans. Business Daily African explains that non-recourse legal funding is not a well-known concept in Kenya. Increasing public understanding of the risks and benefits of the practice may be the first step in widespread acceptance. Funding litigation is risky for investors because of the long time frames between investment and return, and because of the non-recourse nature of the funding. Employing an analyst and an independent lawyer are recommended to anyone considering making an investment in litigation. According to Legalist, 80% of cases funded by the firm have ended in awards or settlements. In general, funders enjoy a high ROI. But this depends greatly on the vetting processes used, and the types of cases in which funders specialize. Right now, demand is high for legal funding in Kenya. And with global funders now flush with capital, it's plausible to believe that some may venture into this somewhat risky, yet untapped market. 
Commercial

Litigation Funders Delighted by DBA Ruling

Regulations regarding damages-based agreements can create havoc in a collective action. Recently, all eyes were on a Court of Appeal ruling regarding truckers and the Road Haulage Association, as well as the third-party funders financing the collective action. Law Gazette details that the Court of Appeal determined that the funding did not constitute a DBA. Had they ruled otherwise, the agreement between funders and claimants could become unenforceable—putting the whole case in jeopardy. The ruling has consequences beyond this one case. Indeed, an affirmative ruling on this issue could have negated most current litigation funding agreements. Lord Justice Henderson referenced a 2006 law—the Compensation Act—as part of the basis for his decision. Lawyers for the Road Haulage Association explain that the ruling is excellent news for litigation funding as an industry, as the judgment affirms that funding contracts are not DBAs.