How to Get Really Rich Off Litigation Financing: Viewpoint
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But finance didn’t grow to become such a big slice of the economy by letting big pots of money escape its tentacles. The top 200 U.S. law firms generated about $110 billion in revenue last year, according to ALM Intelligence. Globally, a multiple of that figure is likely to have been paid out in damages. A tempting target.
Enter, litigation finance, companies like Burford Capital Ltd., IMF Bentham Ltd. or Vannin Capital that provide capital to a company or law firm to finance lawsuits in return for a share of any proceeds. Some will immediately question their social benefit: there’s a potential conflict between money and justice being served, not to mention the possibly inflationary impact on the number and cost of lawsuits. For its part, the industry argues it gives access to justice and frees up funds for other purposes.
There’s no argument that the business can be enormously lucrative. Burford says the cases it has concluded so far have generated a 75 percent return on invested capital. Since going public on London’s Alternative Investment Market in 2009, the stock has risen about 1,500 percent to value the company at 3.3 billion pounds ($4.4 billion) and make millionaires of lawyer founders Christopher Bogart and Jonathan Molot.
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