Are Litigation Financiers Turning To Crowdfunding?

BusinessWeek’s Paul Barrett reports on a new litigation-finance venture, LexShares, which is a crowdfunding (i.e., offers the ability for “small-scale financiers” to invest online) website backed by Atlas Ventures.

“If the plaintiff wins, the investor receives a portion of the proceeds; if the plaintiff loses, the investor forfeits their investment,” according to a company press release.

Barrett, however, warns against the venture, writing that “litigation finance inevitably encourages more lawsuits,” and turns litigation “into a vehicle for third-party speculation.”

To bolster his point, Barrett explains embattled plaintiffs’ attorney Steven Donziger “sustained a two-decade legal campaign” against Chevron, in part, “by accepting investments totaling close to $30 million from hedge funds and individuals.”