Crypto Bankruptcies Attract Interest from Litigation Funders

Once viewed as a bold new frontier for retail investment, cryptocurrency has suffered in recent times with huge declines in the value of certain currencies, alongside a number of crypto companies either collapsing or falling foul of scandals involving customers being misled and defrauded. However, as many industry analysts have been speculating, it seems that the resulting bankruptcy filings of crypto firms is drawing the attention of litigation funders who may look to fund consumers’ claims and generate significant returns on investment.

Reporting by Pensions & Investments discusses the recent crypto bankruptcies of companies such as Genesis and FTX, noting that the fallout from these collapses is likely to draw investor interest in related litigation. Commenting on the potential litigious activity, Brandon Baer, CIO of Contingency Capital, stated that the firm was looking at potential claims in this space, but there was not complete clarity at this stage as to how different consumers will be classified, such as whether a customer who deposited cash with FTX will be treated equally with a customer who deposited actual cryptocurrency.

Mr Baer also highlighted that Contingency was seeing an uptick in interest in litigation finance from institutional investors such as pension funds and foundations. He emphasized the fact that litigation funding retains a degree of separation from investment assets more closely tied to the stock market, and therefore it is viewed as an opportunity for institutional entities to further diversify their portfolio.