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Litigation Finance Start-Up Expands Offerings

Sept. 7, 2017, 9:37 PM

A start-up litigation finance firm is expanding its offerings, the latest sign of a shifting market for outside investment in lawsuits.

Today, LexShares, an online platform that allows investors to finance lawsuits, announced that it will start offering clients litigation finance on a portfolio basis — whereas in the past, it only offered investors the ability to fund single cases at a time.

Such financing arrangements are hardly unprecedented among the large players in the litigation finance industry, but it is a significant play for LexShares, which launched in 2014 and has found a niche market in financing small to mid-sized claims. They will now offer an online portal, where clients can survey the landscape of legal claims to figure out where to invest their money.

Instead of allowing investors to bet on an individual lawsuit, LexShare will now offer clients — who are generally hedge funds, credit funds and family offices — the opportunity to invest in a wide array of cases at once.

The company creates an investment portfolio of cases they feel are winnable by analyzing federal and state filings with a proprietary software called Diamond Mine. LexShares also employs lawyers who sift through metrics in each case, like the litigation history of the plaintiff and the law firm representing them, to whittle down the selection further. The final cases that are left are presented in their online platform.

Since it launched, LexShares helped guide $16 million in investor dollars into 40 different cases. The cases are concluded in an average of about 15 months and so far, they have had eight wins out of nine cases, according to the company. It invests primarily in commercial litigation disputes like breach of contract or fiduciary duty, of contract, antitrust and false claims act cases, Jay Greenberg co-founder and CEO of LexShares explained.

LexShares presents the potential investment opportunities by rating the plaintiff’s litigation history and the strength of the legal team among other metrics.

“The feedback we continue to receive from investors is a greater exposure to cases through LexShares platform,” he said. “We’re excited to get the fund out there.”

Other litigation finance firms such as Burford Capital offer clients portfolio based financing, as opposed to offering financing one specific case.

Greenberg came to LexShares from Deutsche Bank, where he worked in their technology and investment banking office. Max Volsky, co-founder of LexShares, has worked in litigation finance for over a decade, he said, and oversees the vetting process for the cases LexShares takes on.

LexShares growth efforts come as larger investment firms like Burford Capital are starting to bet big on the industry by paying paltry sums to snatch up competitors like Gerchen Keller Capital, which Burford bought in 2016. Burford has over $2 billion committed to the legal market, according to its website.

In July, UK litigation finance group Woodsford Litigation announced plans to invest $150 million in cases over the next two years, with $112.5 million, going towards domestic U.S. litigation, Big Law Business reported .

As for LexShares, their largest case offering since the site began is $3,775,000 and its smallest, $85,000. The company will limit the marketplace fund to 99 members at first and expects to have a maximum offering of $25 million with a minimum investment in the fund of $75,000. Until now, the average investment was $408,000 per case according to company documents.

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