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“Edge” for Litigation Finance Managers

July 22, 2020

“Edge” for Litigation Finance Managers

The following article is part of an ongoing column titled ‘Investor Insights.’  Brought to you by Ed Truant, founder and content manager of Slingshot Capital, ‘Investor Insights’ will provide thoughtful and engaging perspectives on all aspects of investing in litigation finance.  EXECUTIVE SUMMARY
  • As the litigation finance industry matures, there will be more competition, more fragmentation and more specialization
  • Competitive advantages will be necessary for managers to differentiate themselves in the marketplace and produce strong risk-adjusted returns
  • Managers should institutionalize their “edge” to create equity value for themselves, and separate the value of their organizations from the principals running it
INVESTOR INSIGHTS
  • Investors should be looking for managers that have some advantage, or “edge” vis-à-vis their competition; an informational advantage is one approach
  • Funders should be open-minded about their diligence process, and experiment with non-conventional approaches to add value to the case
  • Informational advantages may be particularly beneficial in collections and enforcements
In the capital markets industry, there is a concept referred to as “edge”, which can be defined as any legal form of information, insight or proprietary process or knowledge which an investor possesses that allows him or her to outperform peers and generate alpha.  Investors look for managers with “edge” as a point of differentiation, and as a means to lower risk and enhance returns in a given investment strategy. In thinking about how a litigation funder can develop ‘edge’, one option is to acquire an informational advantage that enables the funder to invest where others do not dare to tread, or avoid investing where the path is well worn.  One way to obtain an informational advantage is to look where others are not looking.  Today, we have at our disposal the world’s largest accessible database free for anyone to access – the worldwide web.  We also have the so-called “dark web”, where fewer dare to participate, but which may possess insights nonetheless. In order to get a better perspective on the nuggets of gold that lie within the web, I decided to reach out to Cameron Colquhoun of NEONCentury, a UK-based intelligence firm, to better understand how the litigation finance community may be able to generate edge. The Web…. In some ways, little has changed about our use of the internet in 30 years: we all still use screens, keyboards and mice to open windows and browser pages. What has changed, without exception, is the size of the world behind our screens – which is far bigger than our brains and imaginations can appreciate. As of 2016, Google revealed it knew of 130 trillion web pages, and the real number today is likely to exceed 200 or 300 trillion. To put it another way; as the Head of Security at Twitter pointed out back in 2011, one-in-a-million events happen on the internet every second, and one in a billion events happen almost as frequently. It is a mathematical near-certainty that within all of this data, game-changing intelligence is sitting there, waiting to be found – vital to the success of any litigation. The truth is, very few law firms or investors understand this reality, and therefore rarely ever engage or commission the type of intensive, detailed online investigations that are required to push the confidence intervals of success up by 1, 2, 5, 10 or even 20%. In the biggest cases, this can mean tens if not hundreds of millions of dollars of difference in settlement. …and the Dark Web The dark and unindexed web is another part of the web that is as yet untouched by both law firms and litigation finance. In particular, leaked data and data ‘dump’ sites hold huge amounts of pivotal intelligence. The most prominent case of leaked data to date is of course the Panama Papers, where millions of files belonging to a single Panamanian law firm were leaked online and led to over $1.2bn in recoveries (the real figure is likely to be far higher, as most countries do not make settlement data public). Dozens of prominent individuals had their assets exposed, and with millions of documents available to research – many more hidden assets and frauds are likely to be revealed amongst the 11.5 million files. Every time a new major leak is released online, (more recently BlueLeaks and 29Leaks), law firms or litigation financiers should be feverishly combing through its contents looking for angles. Case Study At NEONCentury, we are often tasked with conducting investigations prior to a potential litigation. In one case, a hedge fund asked for our help as they believed a group of CEOs were meeting in secret, and were considering a litigation. This global company, they suspected, was going to be sold for several billion below market value in some kind of backroom boys club deal. Using our data capabilities, we tracked the private jets owned by those who attended these meetings, but the planes were delisted from public view (this is known as a BARR / LADD request and often used by CEOs and Ultra High Net Worth investors for anonymity). BARR-listed jets do not appear on sites like FlightRadar and FlightAware. However, these aircraft, by law, must emit radio signals (ADS-B) data, and using the right online databases and sources, the aircraft can be tracked and historical manifests can be discovered. We were able to conclusively prove that the private jets belonging to three members of the secret meetings were all on the same runways at multiple times and locations, giving our client a route to a potentially multi-billion dollar litigation. It is difficult to imagine a single law firm on the planet that would have these capabilities in-house, or even understand the ‘art of the possible’ when it comes to open data. Today, litigation financiers allow law firms to manage the research and investigation sides of a case, hoping that either the law firms’ in-house research teams or external corporate intel firms might yield further intelligence to tip the outcome in their favour. Law firms are not known for their technological prowess or understanding of the internet, generally, and therefore the litigation finance world may be missing real value in allowing law firms to manage the technical and cyber side of a case on their behalf. …the “Edge” If investors can accept that game-changing intelligence for any litigation is out there in the public domain, they may be better-prepared to commission this research directly with corporate investigations firms *before* any litigation is even considered. Investors would then be forearmed with a much stronger hand when they engage both law firms and claimants. This approach would greatly improve the ROI of litigation finance, and is analogous with the world of hedge funds and short-sellers. Many of these firms spend months or years investigating a company, searching for hidden value or opportunity. In the case of Wirecard, hedge funds discovered evidence of fraud just by conducting deep online investigations of Wirecard’s clients. Some walked away with billions in returns on this research. There is no reason why the same approach cannot be applied to the world of litigation finance: forward-thinking investors, who understand the power of corporate intelligence and the scale of the internet, can partner with world class investigators, and take these results to the right law firms to alter the course of multimillion and multibillion-dollar litigations. Investor Insights As the litigation finance industry matures, there will be a significant increase in managers who are attracted by the returns inherent in the industry, and the intellectual challenge of applying their litigation craft in another application.  The industry will scale, fragment and specialize.  This will make it more difficult for fund managers to differentiate their approach and value.  Forward-thinking managers should be looking at ways to create “edge” for themselves to attract institutional capital and generate superior risk-adjusted returns.  An informational advantage is one such way to create “edge”. As always, I am open to criticism and other points of view, so feel free to contact me to exchange ideas.  Edward Truant is the founder of Slingshot Capital Inc., an investor in the litigation finance industry (consumer and commercial) and a former partner in a private equity.  Ed is currently designing a new fund focused on institutional investors who are seeking to make allocations to the commercial litigation finance asset class.  Cameron Colquhoun is the founder of Neon Century, a former UK intelligence officer and winner of the Fulbright Award for Cyber Security. Neon Century is an elite corporate intelligence firm based in London, providing clients in the hedge fund, equity and litigation sectors with decisive advantage.

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Commercial

Malaysia’s New Arbitration Funding Rules Follow Collapse of Therium-Backed Sulu Claim

Two Malaysian jurists have published a retrospective on the Sulu arbitration, drawing a direct line from the failure of the funded US$15 billion claim against Malaysia to the statutory framework the country has since built around third-party funding of arbitration.

As reported by The Edge Malaysia, the piece is written by Tan Sri Zainun Ali, a former Federal Court judge, and barrister J J Chan. They note that the claim brought by parties describing themselves as heirs of the Sultan of Sulu "was reportedly backed by third-party litigation funding, attributed in public reports to Therium Capital Management," on the usual basis that the funder would take a return if the claim succeeded.

It did not. The Paris Court of Appeal annulled the award in full on 9 December 2025, holding that no valid arbitration agreement capable of binding Malaysia existed. The claimants were ordered to pay Malaysia €200,000 in costs, and separately lost costs orders in proceedings before the Netherlands Supreme Court.

The legislative response is the part with the longest reach. Malaysia's Arbitration (Amendment) Act 2024 took effect on 1 January 2026 and, in the authors' description, "brings third-party funding of arbitration within a clear statutory framework," requiring disclosure of both the funding arrangement and the identity of the funder.

For funders, the sequence is instructive: a single high-profile enforcement campaign against a sovereign produced a disclosure regime that will now apply to every funded arbitration seated in the jurisdiction.

Commercial

New York Poll Finds Nearly 80% of Voters Would End Third-Party Litigation Funding

A statewide survey of likely New York voters has found that close to four in five would do away with third-party litigation funding altogether, placing the practice among the least popular items in a broad tort reform poll.

According to the Empire Center for Public Policy, which commissioned the survey from Cygnal and published the results on 2 September, 79.7% said they support ending the arrangement under which outside investors finance lawsuits in return for a share of any recovery.

Litigation funding did not stand alone. The poll found 94.5% supporting prosecution of staged-accident fraud, 83.4% favouring limits on pain-and-suffering awards, 79.7% backing changes to workplace-injury liability rules, 77% supporting reforms aimed at frivolous lawsuits, and 66.6% in favour of amending the Scaffold Law, New York's absolute-liability statute for elevation-related construction injuries.

The clustering matters as much as the individual figures. Funding is being tested here alongside fraud and damages caps rather than as a discrete question about access to capital, and the framing offered to respondents describes investors financing lawsuits for a portion of the proceeds without reference to claimants who could not otherwise bring a case.

New York enacted consumer legal funding protections earlier this year, and the state has no disclosure statute covering commercial funding. Polling of this kind is likely to be cited in Albany as the next session approaches, and funders should expect the 79.7% figure to travel well beyond the survey it came from.

Commercial

DIFC Court Orders Defendant to Reveal Who Is Funding His Legal Team in $456M TrueUSD Case

A Dubai court has given a defendant in a $456 million stablecoin dispute until 7 September to swear an affidavit identifying who has been paying his lawyers, in an unusually direct judicial demand for the source of a litigant's legal funding.

As reported by CryptoSlate, the Dubai International Financial Centre Courts made the order in *Techteryx Ltd v Aria Commodities DMCC and others*, the proceedings over $456 million transferred out of the reserves backing the TrueUSD token. Matthew William Brittain, one of the respondents, must disclose by 4pm Gulf Standard Time.

The order is specific about what is wanted. Brittain must give the amounts, dates and bank accounts behind fees paid to Quinn Emanuel, Horizons, Gall, Campbells and FTI Consulting, identify the original sources and ultimate beneficial owners of those funds, explain how the accounts were funded and produce supporting documents. It singles out $1,083,912.49 paid by Aria Bio Industries FZE on 31 October 2025.

Compliance is required "to the best of his ability," and the court indicated that further adjournments would need "the most extreme circumstances" backed by strong evidence. Sanctions are not automatic; Techteryx would have to apply. A committal hearing with a four-day estimate is listed for 26 October.

Most disclosure fights concern claimant-side funding. This one runs the other way, and shows a court treating the defence's funding chain as a matter it is entitled to see.