LexShares is a litigation finance firm, with an innovative approach to originating and financing high-value commercial legal claims. LexShares funds litigation related assets through both its online marketplace and dedicated litigation finance fund. Founded in 2014, the company is privately owned with principal offices in Boston and New York City. The LexShares team is comprised of experienced litigation, finance and technology professionals. You can learn more about us here.
What is litigation finance?
At its most basic level, litigation finance (also called litigation funding) is the practice where a third-party unrelated to the lawsuit provides capital to a party involved in litigation, in return for a portion of any financial recovery from the lawsuit. You can learn more about litigation finance by reading our comprehensive Litigation Finance Guide.
How do I get started on LexShares?
If you are an attorney or plaintiff, you can start here and submit your case for review. If you are interested in investing in legal claims, you can start here.
For Plaintiffs and Attorneys
How do I receive funding through LexShares?
If you are an attorney or plaintiff, you can start by submitting your case here.
What types of cases can be funded on LexShares?
LexShares assists in funding meritorious commercial cases at all stages of litigation, including:
Banking and insurance disputes
Construction and real estate disputes
Industrial products liability
Intellectual property and copyright infringement
Whistleblower, qui tam
What can funding be used for?
Use of proceeds may include:
Hourly legal fees
Expert witness fees
How much funding can LexShares provide?
LexShares will work with you to determine the expected costs of litigation and the optimal amount of funding in order to reach a resolution. LexShares minimum investment amount is $200,000 and is uncapped regarding maximum funding size.
Will information about my case remain confidential?
Does LexShares receive any control over the litigation or settlement negotiations?
No, LexShares does not receive any rights to manage, interfere with, or influence the prosecution of the case. Settlement strategy and decisions remains in the plaintiff's control.
Does litigation funding affect attorney-client privilege?
Our involvement as passive investors in legal claims does not affect the attorney-client privilege or put attorney work product at risk. We do not request access to attorney-client privileged materials and we are always cognizant not to risk waiver of privilege. Recent court decisions have upheld that attorney work product shared with third-party funders is protected and communications with third-party funders are covered by the “common-interest” doctrine.
What criteria determines if my case will be funded through LexShares?
A number of factors are considered when evaluating cases for funding through LexShares. These factors include:
Legal merits: Cases must have strong legal merits. Legal merits means a sound basis for the case and a clear understanding of the claim’s value. Estimated time to resolution is also taken into account.
Legal team: The case must be represented by experienced counsel with strong track record of success in the related legal area. Counsel may be working on a contingency or hourly basis.
Defendant's creditworthiness: Defendants must be well-capitalized entities with an ability to pay damages awarded as a result of litigation.
Costs of litigation: The expected costs of the claim must be foreseeable. An estimated budget is required from counsel to consider a case for funding through LexShares.
How involved is LexShares, and what information do I need to provide once an investment is made?
LexShares is a passive investor. LexShares will be entitled to receive material updates from the attorney of record and will monitor the case based on based on publicly available information.
I submitted a case. What happens next?
LexShares' team will complete an initial review of the legal claim and may contact you should additional information be required. Cases are reviewed in the order they are received.
How long will it take LexShares to review my case?
Cases are reviewed in the order they are received. If a legal claim is accepted for review, you or your legal team may be contacted for additional information. The speed of the review process depends on the responsiveness of the parties during the review period. If a claim meets the criteria to be funded, you will receive a term sheet. After the terms are accepted, a final review will be performed, lasting up to four weeks.
What information do I need to provide LexShares to for my client's case to be funded?
LexShares' initial review will be based on the information you provide online or over the phone regarding your client's case. Only information which is publicly available or discoverable may be provided to LexShares. Additional information and supporting documentation may be requested from you or your legal team.
How do I invest in commercial legal claims with LexShares?
LexShares' team of legal and investment professionals consider a number of factors when evaluating cases. These factors include:
Legal merits: Cases must have strong legal merits, which means they must have a sound legal basis for the case and a clear understanding of the claim’s value. Estimated time to resolution is also taken into account.
Legal team: Plaintiffs must be represented by experienced counsel with a strong track record of success in the related legal area. Attorneys may be working on a contingency or hourly basis.
Defendant's creditworthiness: Defendants must be well-capitalized entities with an ability to pay any damages awarded as a result of litigation.
Cost of litigation: The expected costs of the claim must be foreseeable. An estimated budget is required from counsel to consider a case for posting on LexShares.
Who invests through LexShares?
LexShares investors include high net worth individuals and institutional investors, including select family offices, hedge funds and asset managers.
Do I need to be verified as an accredited investor to invest through LexShares?
Yes, you must be verified as an accredited investor in order to invest in legal claims through LexShares. Interests are offered pursuant to Regulation D Rule 506(c) which requires issuers to take reasonable steps to verify that all investors are accredited.
Do I qualify as an accredited investor?
The U.S. Securities and Exchange Commission (SEC) defines individual accredited investors as any person who reported annual income exceeding $200,000 on their past two tax returns, or currently maintains a net worth exceeding $1 million (individually or jointly with a spouse). Married individuals or spousal equivalents who jointly file taxes must report combined income greater than $300,000.
The SEC expanded its criteria for accredited investor qualification in August 2020 to include Series 7, Series 65, and Series 82 license-holders, “knowledgeable employees” of a private fund, limited liability companies with $5 million in assets, family offices with at least $5 million in assets under management and their family clients, and certain other individuals who can demonstrate “clear measures of financial sophistication.”
Click here for the complete SEC definition of an accredited investor.
How do I prove that I am an accredited investor?
You can upload one of the following items to the Accreditation tab on your Investor Profile:
Accreditation verification letter: Letter signed by a third-party (CPA, attorney, investment advisor, broker/dealer) of your choosing, verifying your status as an Accredited Investor.
Income proof: Tax returns or W2s for the past two years.
Asset proof: Copy of recent account or brokerage statements showing the value of your account(s) to be in excess of $1 million and credit release form.
Please note verification of status as an Accredited Investor via an accreditation verification letter or asset proof remains valid for 3 months. Verification of status as an Accredited Investor via income proof remains valid until April 15th of the following year.
How long does my proof of status as an accredited investor remain valid?
Verification of status as an Accredited Investor via an accreditation verification letter or asset proof remains valid for 3 months. Verification of status as an Accredited Investor via income proof remains valid until April 15th of the following year.
When I invest on LexShares, what do I own?
Investment opportunities posted on LexShares are indirect investments in legal claims offered through single purpose pooled investment funds managed by LawShares, LLC and sold through WealthForge Securities, LLC, a registered broker dealer and member FINRA/SIPC. When you invest you are purchasing equity in an LLC as a limited member. In turn, that LLC contracts directly with the plaintiff.
Are there fees for investors?
There are no management fees charged to investors in individual cases through the LexShares platform. LexShares takes a carried interest in each case successfully funded. Carried interest is a share of the profits of an investment. LexShares affiliates are also entitled to receive an administration fee, a prepaid operating fee, and interest and fees related to bridge loan financing for prefunded deals. Also, a broker fee will be paid to a broker-dealer, which is related to affiliates of LexShares. Please refer to the investor packet for further details.
How does LexShares prefunding of a deal work?
To prefund a deal,
LexShares forms an LLC that will make the investment, and the LLC accepts its initial
equity investments, entirely or primarily from one or more investment funds
managed by LexShares affiliates. The LLC also receives a short-term loan from
LexShares PF LLC to enable it to fund the case investment in full. After the
LLC prefunds a case investment, LexShares investors that participate in the
offering receive equity in the LLC, and the LLC uses the investor subscription
proceeds to repay the short-term loan from LexShares PF LLC and pay fees and
expenses, as described in the investor packet.
Prefunding of the case investment accomplishes several key
1) Prefunding utilizes capital sourced entirely or primarily
from LexShares affiliates, which demonstrates our confidence in the deal and
our vetting process.
2) Prefunding enables LexShares to offer certainty of funds
to plaintiffs and attorneys, which allows for expeditious closings. The
corollary benefit for our investors is that prefunding helps secure access to
litigation finance opportunities.
3) Investors that participate in deals that were prefunded will
immediately own an interest in that deal. Without prefunding, however, investors
would have to wait for the deal to be fully subscribed and for all participants
to fund their portion of the funding amount prior to closing.
I finished joining as an investor but I still do not see any specific case investment opportunities. Why is this?
LexShares has a rigorous vetting process for prospective investments. This means that there will not always be an open case for investment on the LexShares platform. Investors who complete registration will be notified as soon as there is a new case available for investment.
How do investors transfer funds to LexShares?
For each investment, investors are able to choose to fund their investment via ACH or wire transfer. For each investment opportunity there will be specific account numbers that we will provide to the investor so that funds are received properly and securely.
Are these investments risky?
Yes, investments in legal claims offered through LexShares are speculative and carry a high degree of risk. Investment opportunities posted on LexShares are “private placements” of securities that are not publicly traded, are subject to long holding period requirements, and are intended for investors who do not need a liquid investment. Investors must be able to afford the loss of their entire investment without a change to their lifestyle.
Is the LexShares.com platform secure?
Can non U.S. based investors fund cases listed through LexShares?
Yes, LexShares supports funding by non U.S. based investors through our online platform. Additional documentation may be required.
LexShares Marketplace Fund
What is LexShares Marketplace Fund II?
LexShares Marketplace Fund II (LMFII) is LexShares’ second dedicated litigation finance fund, with a target size of $100 million. Similar to LexShares Marketplace Fund I, LMFII provides institutional and individual accredited investors the ability to access a portfolio of litigation-related assets through a single fund allocation. As of June 10, 2020, LMFII is accepting commitments from new investors here.
LMFII has retained Seward & Kissel LLP as its legal counsel, BDO USA, LLP for tax and auditing services, and SS&C Technologies Inc. as its fund administrator. Additionally, LMFII has secured a principal protection insurance policy from AmTrust International Insurance, Ltd., an industry-leading global insurance provider. Investors can elect to cover all or a portion of their commitment to LMFII with this policy.
What is the investment strategy of the LexShares Marketplace Fund II?
LMFII follows a general litigation finance strategy, with the ability to make direct or indirect investments in legal claims by purchasing the right to receive a portion of any prospective recovery from such matters.
What type of lawsuits will the LexShares Marketplace Fund II target?
LMFII targets a broad set of litigation finance opportunities. These include commercial claims at all stages of litigation, portfolios of legal claims, law firm financing, and fee and settlement acceleration.
Will the LexShares Marketplace Fund II invest in legal claim offerings posted on the LexShares platform?
Yes, LMFII invests in legal claim offerings posted on the LexShares platform as well as in litigation finance opportunities directly.
What type of information will investors in LexShares Marketplace Fund II receive post closing?
Updates on LMFII's activity will be provided on a quarterly basis to investors through the LexShares platform. Quarterly updates include Fund financial and capital account statements prepared by third party fund administrator SS&C Technologies Inc. BDO USA, LLP has been engaged to provide investors audited fund financial statements annually.
What was LexShares Marketplace Fund I?
LexShares Marketplace Fund I (LMFI) was LexShares’ inaugural litigation finance fund. LMFI was fully subscribed for $25 million as of January 2018. You can read about the closing of LMFI here.
All accredited investors using the Site must acknowledge the speculative nature of these investments and accept the high risks associated with investing in legal claims including but not limited to concentration risk, lack of control over the prosecution of underlying claims and claimant's inability to assert and collect on their claims. Investment opportunities posted on this Site are “private placements” of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. The plaintiff may not prevail in their lawsuit, resulting in a loss of invested capital for investors. Investors must be able to afford the loss of their entire investment without a change to their lifestyle. Diversification does not guarantee profits or protect against losses. The securities are offered pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended, and are not required to comply with specific disclosure requirements that apply to registration under the Securities Act. Neither the US Securities and Exchange Commission nor any state regulator or other regulatory body has passed upon the merits of or given its approval to the securities, the terms of the offerings, or the accuracy or completeness of any offering materials. Neither LexShares nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability whatsoever arising, for any error or incompleteness of fact or opinion in, or lack of care in the preparation or publication, of the materials and communication herein or the or that the valuation of any securities offering is appropriate. LexShares does not give investment advice, provide analysis or recommendations regarding any offering posted on the Site. Prior results are not indicative of future performance; actual results may vary materially. Any testimonials are examples from clients or press, and may not be representative of your experience. They are not a guarantee of performance and they have not been compensated for their testimonials. Articles or information from third-party media outside of this domain may discuss LexShares or relate to information contained herein, but LexShares does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by LexShares of the linked or reproduced content. The Site may contain “forward looking statements” which are not guaranteed. IRR reflects the annualized rate of return per the xirr Excel function. All investors should make their own determination of whether or not to make any investment, based on their own independent evaluation and analysis. You are strongly advised to consult your legal, tax and financial advisors before investing. The securities offered on this Site can only be marketed in jurisdictions where public solicitation of offerings are permitted; it is solely your responsibility to comply with the laws and regulations of your country of residence.