- Litigation Finance
TrialFunder
Update: We are keeping this review up for historical purposes, but TrialFunder is no longer active or is otherwise no longer accepting investments.
TrialFunder is a litigation finance platform open to accredited investors. After several months offline, as of early 2018 their website is back online, but their Twitter account hasn’t been updated for nearly two years and their blog remains broken. Investors interested in litigation finance may want to look instead at LexShares and YieldStreet.
Pros
- Litigation finance has a low correlation with other asset classes
- Most investments are pre-funded
- TrialFunder emphasizes a detailed review and due diligence process, stating that fewer than 1% of cases that apply are funded
Cons
- Website includes inconsistent and sometimes conflicting information, and their blog is broken
- Information and educational material is sparse compared with other litigation financing platforms
- "Signup" process is currently just an email submission form
- No returns until/unless plaintiff wins or case is settled
- Only open to accredited investors
Overview
Update: We are keeping this review up for historical purposes, but TrialFunder is no longer active or is otherwise no longer accepting investments.
TrialFunder is a Reg D platform open only to accredited investors that offers the opportunity to invest in the outcome of commercial litigation. Plaintiffs apply to TrialFunder to raise $100K to $1M in financing to fund their case, and if approved following a detailed review by TrialFunder (they claim fewer than 1% of applicants are approved), in most cases the investment is pre-funded before being offered to investors. Investors receive a return if and when the plaintiff wins or the case settles. If the plaintiff loses, investors lose their entire investment. The TrialFunder website includes an unsettling amount of conflicting information, the blog is totally broken, and the “registration” process appears to be little more than an email submission form. While litigation financing is a legitimate alternative investment asset class, prospective investors may want to explore other options such as LexShares or YieldStreet.
Types of investments TrialFunder offers
Litigation finance as an investment type has been around for a long time, but as with many of the investment types we profile here, until recently was only open to institutional investors like hedge funds or wealthy family offices. Investors are helping to finance a commercial plaintiff in a civil lawsuit, such as breach of contract, negligence, or patent infringement. Litigation finance (especially in individual cases) is very risky and highly speculative, and even if the plaintiff eventually wins or the case settles, there could be a high opportunity cost if the case drags on for a long time.
What do you get when investing with TrialFunder?
As with many Reg D investment crowdfunding portals, investors receive a membership interest in a special-purpose investment vehicle – an LLC created for the specific investment.
Potential returns and cashflow
Litigation finance is very risky and highly speculative. There is no return on the investment at all unless the plaintiff wins or the case settles (and for an amount that is greater than the amount financed). While details and performance of course varies considerably on a case-by-case (pun intended) basis, in general the returns tend toward binary – either a very strong positive return (well over 50% or more), or a total loss.
This review was first published on 25 March 2017.
Our Rating
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