First of Its Kind Litigation Finance Stock Offering

Litigation Finance has taken the investment world by storm. Mechanisms to vet cases are always improving, and the industry has adapted to changing circumstances. The problem? As a maturing asset class, Litigation Finance is typically only available to wealthy investors. Thanks to a startup from partners Roche and Freedman, that has changed.

ABA Journal reports that retail investors can buy a share in a federal lawsuit filed by hemp growers. The minimum investment is only $100. The risks to investors are substantially lower than those typically endured by third-party funders.

In the case, known as Apothio, hemp growers allege that the government illegally disposed of at least $1 billion in hemp crops in California. There’s a possibility that the case will be dismissed. If that happens, investors will see 80% of their investment returned. If the case succeeds, investors may see as much as a 350% return.

Funds deployed to the Apothio case are provided on a non-recourse basis. So if the case goes to trial and loses, investors lose their entire investment—as is typical of litigation funding agreements.

Are there downsides for consumers? Obviously, any investment carries risk. Litigation as an investment can be perilous, and many laymen lack the knowledge and experience needed to vet legal investments effectively.

One professor at Indiana University applauds the laudable efforts of Roche and Freedman, but they worry that new investors won’t understand the intricacies of their investment, leaving them unable to make informed decisions. This would include background info and a summary of underlying legal issues.

Roche’s team is developing new methods of explaining case data to investors in a manner that is easily digestible for those without legal expertise. The Apothio case was filed in the Eastern District of Columbia in 2020. Motions to dismiss are pending.