Following decades of large verdicts, the legal industry has attracted more attention and more outside investment than ever before. As a result, the litigation funding industry is now a multibillion-dollar market with firms that promise investors huge returns.
But every opportunity has associated risks. These alternative investments have little securities oversight, creating an environment where fraud can thrive. Deceptive individuals and third-party investment groups often misuse funds, fabricate case information, and operate Ponzi-style schemes that misrepresent cases and leave investors empty-handed.
If you’ve been defrauded, remember that you have legal rights and recovery options. Acting quickly protects remaining assets and increases your chances of meaningful restitution. Contact The Lyon Firm today online or by calling (513) 381-2333 to investigate your claim, identify responsible parties, and pursue financial recovery.
“The Lyon Firm truly cares for its clients. From the first call to the last settlement check. They are a dependable law firm every step of the way. Joe and John are responsive and great to work with. Thank you.”
– Mitch T. | Client
What Is Litigation Financing?
Litigation financing, also called third-party legal funding, allows investors to bankroll lawsuits in exchange for a percentage of any settlement or verdict. The concept appears straightforward: plaintiffs receive funding to cover legal costs and associated expenses, and investors share in any financial recovery.
The reality is far more complicated. Operating in a loosely regulated environment with minimal disclosure requirements, litigation funders often work behind closed doors, influencing legal strategies and prioritizing profits over justice. The lack of transparency makes it difficult for investors to verify whether their money is being used legitimately or vanishing into fraudulent sinkholes (the pockets of the investment groups).
Common Forms of Litigation Funding Fraud
- Fabricated Cases: Promoters create a list of pending lawsuits that either don’t exist or have already been settled, collecting investor money for nonexistent opportunities.
- Inflated Return Promises: Fraudulent firms may guarantee 30 to 50 percent annual returns—unrealistic figures designed to lure unsuspecting investors.
- Fund Misappropriation: Instead of financing lawsuits, operators spend investor money on personal luxuries, real estate, or unrelated expenditures.
- Hidden Conflicts of Interest: Fund managers secretly maintain financial ties to attorneys or plaintiffs they claim to fund independently.
- Ponzi Structures: New investor capital pays earlier investors, creating the illusion of steady profits while the scheme collapses behind the scenes. When these operations eventually unravel, investors discover frozen accounts and huge financial losses.
Real-World Examples of Litigation Funding Issues
A few recent cases illustrate the scale of deception in this industry:
A New York litigation financing firm raised millions, claiming to invest in class action and mass tort cases. Regulators discovered most cases were fictional, and the firm was operating a classic Ponzi scheme. The founder faced criminal charges for securities and wire fraud.
In California, a fund marketed “risk-free” investments tied to personal injury cases, promising elderly retirees 40 percent annual returns. The company never financed any lawsuits. When authorities shut down the operation, investors learned their money had funded luxury homes and cars.
And even beyond cases of outright fraud like the above examples, the litigation financing industry poses systemic problems for the legal system, including:
- Lack of Transparency: Unlike traditional investments, litigation financing agreements rarely require disclosure. Courts and opposing parties often don’t know when third-party investors are influencing cases, distorting settlement negotiations, and compromising fairness.
- Fueling Frivolous Litigation: Easy access to outside capital incentivizes questionable claims, overwhelming court systems, and drives up litigation costs across jurisdictions.
- Unfair Verdicts: Third-party funders seeking higher returns pressure attorneys to reject reasonable settlements, contributing to massive jury awards that distort the civil justice system.
ABOUT THE LYON FIRM
Joseph Lyon has 17 years of experience representing individuals in complex litigation matters. He has represented individuals in every state against many of the largest companies in the world.
The Firm focuses on single-event civil cases and class actions involving corporate neglect & fraud, toxic exposure, product defects & recalls, medical malpractice, and invasion of privacy.
NO COST UNLESS WE WIN
The Firm offers contingency fees, advancing all costs of the litigation, and accepting the full financial risk, allowing our clients full access to the legal system while reducing the financial stress while they focus on their healthcare and financial needs.
Why Hire The Lyon Firm
The Lyon Firm represents victims of investor and financial fraud nationwide, with extensive experience handling a wide variety of consumer and investor fraud cases. With over 20 years of experience, Joe Lyon and his team understand the unique challenges of unregulated investment markets and know how to expose misconduct in complex financial arrangements. Clients choose The Lyon Firm for the following:
- Extensive Resources: The firm partners with financial experts and investigators to trace hidden assets and analyze fraudulent activity, uncovering the full scope of deception.
- Proven Experience: Decades of experience litigating consumer protection cases across the United States, with a track record of successful recoveries.
- Tailored Legal Strategies: Each case receives individual evaluation to develop the most effective approach for maximum potential recovery.
- Contingency Fee Representation: Clients pay no upfront costs—the firm only gets paid if recovery is achieved, removing financial barriers to justice.
The Lyon Firm believes American consumers and investors deserve transparency, honesty, and justice. When unscrupulous investment groups and fraudsters exploit trust, our firm fights to make things right. The litigation financing industry offers plenty of legitimate opportunities, but the lack of regulation has created an environment where fraud flourishes.
Whether you’ve already invested or are considering an opportunity, due diligence is essential. Verify claims, demand transparency, and never ignore warning signs. Don’t hesitate to contact our legal team to learn more by filling out our online form or by calling (513) 381-2333.