Let’s Talk About LawCoin

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ConsenSys Ventures had earlier on April 1st released a press release concerning several blockchain start-up projects they intended to back for the year 2019, through their accelerator program Tachyon; which was launched in Berlin at the German Bundestag. Among those projects is LawCoin, which is the world’s first litigation finance investments and social justice crowd funding. LawCoin’s target market is high value lawsuits and legal claims.

Tachyon works to provide blockchain based solutions in many different sectors among them healthcare, software and technology, micro insurance, decentralized finance and many more. At the time of the conference, LawCoin founders Noah Axler and Marc Goldich stated that by having LawCoin incorporated into ConsenSys ecosystem will increase its growth and facilitate the utilization of blockchain technology into unlocking liquidity and financial investments in the litigation industry. By applying blockchain technology and crowd funding principles to litigation finance, LawCoin will allow investors to champion legal causes and profit in the event of victorious outcomes. So I guess it’s a form of a gamble of sorts but still worthwhile.

How does litigation investment work?

Say you suffer something like an adverse effects from a product that was recommended to you, say for example a brand of sunscreen that causes you to launch a lawsuit against the company producing the sunscreen. It is a worthwhile issue but it will take time and lawyers need to be paid and they will bill you for all the work they do on your case and the longer it takes the more money you will cough out.

The same goes for class action lawsuits, say for instance if other people as well got affected by the sunscreen and are suing. So here is where LawCoin comes in, you get an investor, who helps you out with the legal fees for the duration of the lawsuit and in exchange, the investor gets a piece of the final settlement at the conclusion of the case. Keep in mind that for the example given above, it is a lawsuit most likely to turn to the favor of the complainant.

Why this idea is even floated is because lawyers make a hell of a lot of money in litigation. It is a business first and justice second because if you cannot pay your lawyer you will have to contend with not having your lawsuit going anywhere unless you come up with the money. Niche alert! Cases such as medical malpractice, personal industrial injury, and investment lawsuits take months if not years, especially where the defendants are big corporations and government institutions and attract heavy settlements which makes good investment opportunities for investors.

According to Marc Goldich, litigation financing is the most forward invention in the legal sector. One major weakness in the new industry is that investments for high cost litigation only makes room for specific heavy hitting investors. Another fact is that once you invest in a particular lawsuit, you are stuck with it until its conclusion, which might take long.

 

 

Working Logic: Initial Lawsuit Offerings

In 2017, there was an article that did not receive as much recognition as it should have pointing towards the future of using crowd funding to launch and execute litigation in the future should blockchain technology and cryptocurrency gain traction to that extent. The only hurdle they fore saw in the implementation of crowd funding in litigation pertained to regulation. Reference was made to one milestone case of a property lawsuit against the West Bromwich Building Society which was a public interest litigation. In the matter, the funds for the lawsuit were sourced on an online platform CrowdJustice that brings people together so that they can cost share the expenses of a lawsuit.  

At the time the article was posted, the notion was that just as the same way that aggrieved parties came together and came up with the money that was needed to successfully launch the case, cryptocurrencies as well can play the same role in executing cases that require huge sums of money to process, especially over a prolonged period of time; in the sense that they are practically buying a share in the proceeds of the outcome.

LawCoin hopes to achieve a working mechanism where investors purchase ‘security tokens’ which represent only a fraction of the lawsuit and in some sort make the funder a third party (although the courts will have discretion as to how far the involvement of an investor only in the interest of justice and not necessarily profit is concerned). According to Goldich, in the future, investors will even be able to trade their lawsuit tokens and the platform will work towards providing a nondisclosure agreement and proceed to allow investors to follow proceedings.

There are still questions as to how far this idea with tokenizing litigation can go. One of them being the amount of control that can be exercised by the parties to a lawsuit. If for instance, a matter is concluded and the aggrieved party does not get the amount of settlement that they hoped for or in the event that the claimant opts to take an out of court settlement, the investors stand to lose out.

What are your thoughts?

 

 

 

 

Leave a Comment

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