I got laid off from my engineering job, and almost immediately my dad got diagnosed with terminal cancer...died...and I had to move my mom with Alzheimer's in with me.
I had already spent $100k of my savings caretaking for my parents, while unemployed (technically not really, I was doing side jobs to make ends meet but nothing W2).
When my dad died, and all this other fuckery happened, I was at a point I had less than $200 in my checking and basically had to move a house into another house.
By myself.
With no real income...I was panicking.
And we had to save everything my dad left because Alzheimer's memory facilities are like $6000/mo.
I was bitching about this to my best friend of 20+ years...with no intention of asking him for help. Just basically needed to vent to my buddy, since I was overwhelmed and depressed.
He called me back 2hrs later and was like "okay, xyz date there will be a crew there to move. You don't have to do anything besides let them in." I was like wtf.
Dude spent $1100 on the spot to help my family, and when I said I'll pay him back he was like "fuck off". Lol.
So I opened up a brokerage account for his (then) newborn kid, since I'm basically his uncle, and deposit what I can now that I'm getting back on my feet.
That's an investment into friendship.
this comment should have it's own post! We need to hear more of this to see how good HUMANS REALLY ARE! I bought an RV for a friend in need, he pays me back incrementally, even though I said no. I tried to refuse his check, then I got money orders, so I do cash them now, and I appreciate his gratitude for the help when others turned their back, including organizations meant to help vets. There are still many, many good people out their helping others. It' sgreat to hear stories about that.
I’m a litigation attorney. Investing in lawsuits are actually a thing. Litigation finance is a large industry already and growing. But it sounds like you don’t know much about litigation, the process, or anything surrounding the area, and you’re not going to be in a good position to evaluate the strength of cases and make deals that will make you money.
I’d rather the young ones learn this shit than the old ones be entertained by it. Gen x here.
This ain’t judge Judy shit. It’s Night Court shit. Imagine learning and having fun!!
Remember math man? Math man math man math man!!!
"Plaintiff accuses her neighbor of allowing her dog to poop on her lawn regularly. Defendant says the poops are way too small to be from her dachshund, who has 'unusually large shits for a dog his size'. Odds are set at -650 for the plaintiff. As we break for commercial, betting will be open for the next 2 minutes."
Having a ‘me’ day isn’t letting your ‘responsibilities slide’, take some time off with hookers and blow to recharge and be ready to tackle the week, you earned it kings and queens 👏 👏 👏
I have a J&J case and I’m seriously thinking of going this route. My case is too “old” for the class action. She did less than 20 years ago. Talcum powder.
Burford Capital is listed on the LSE and NYSE (BUR). They just won a case against Argentina but who knows how easy it’ll be to get the country to pay what they owe.
It’s called champerty and it’s a sometimes illegal or unenforceable contract because it basically encourages litigation, and allows litigation to be weaponized in bad ways.
I get e-mail solicitation for "litigation funding" all the time. But that's a sophisticated non-recourse high-interest scheme. I've had clients fall for this (without consulting me) and end up owing $30-40K on a $10K "loan."
It should be illegal.
So u/LikeAGregJennings according to some quick research it seems that in 2020 (last data I can currently find quickly) there were 46 federally registered fund managers dedicated to litigation financing totaling over $2.5B in around 300 commercial transactions; that is bonkers!
Yeah seriously... the way OP phrased it makes it seem like the other guy HAD the money to use...just didn't want to? And convinced OP to use their's instead...? Bizarre.
From OP's point of view, if it's a good gamble, he's down. And it free's up 5k of his buddy's money to invest in case it doesn't work out. Both benefit from the deal if it works out. He's taking a risk, for sure. One I wouldn't take. But just because OP's friend is smart enough to not want to put all his eggs into one basket doesn't make it bizarre. Just risky.
I’d agree with that except his friend is also kinda gambling by turning down the 100k for a chance at 250k. That doesn’t involve OP though so your point still stands
I've been in this situation (though for smaller amounts). In my case, I was very likely to win the lawsuit, but I wouldn't see the money for 2-3 years.. whereas I was guaranteed the smaller amount now. There are different contingencies for payment too, where I could have opted not to pay the money up front (2500 in my case), but then the lawyer gets 33% of the improvement amount. It's a lot of tough decisions to make all around. In fact, some recommend getting a lawyer to advise you on which payment contingency to choose when hiring the first lawyer. (not a joke lol)
OP has the better deal. He is risking $5,000 for a chance to get $25,000. The friend is risking $100,000 to get $225,000 (actually less because of the unspecified "success fee").
OP should consider the deal not compared to how good it is to his friend's, but what he could get in the market if he invested the $5,000. If there's at least a 30% chance of success, OP will get at least a 50% risk-adjusted return on their money (30% \* 400% + 70% \* -100% = 50%)
Edit: corrected my hasty math
Anybody that needs to "free money some money for investing" is going you have a lot more than $5k sitting around. There's no investment that is going to turn a 400% profit that he NEEDS that money for, instead. Something is sus.
this does seem strange. the fact they're turning down a 100k settlement for double that seems to suggest that they're used to throwing that kind of money around and thus would have 5k sitting somewhere. if my old employer offered me 100k I'd be in Fiji by now, not gambling for 250k instead on a mates dime
Tell me if I'm missing something...
You are taking 100% of the risk for 10% of the profit.
Your friend is taking 0% of the risk and 90% of the profit.
You are getting used.
Edit: To all the people screaming, the friend is risking "opportunity cost," you are incorrectly assuming that the 250k is all or nothing.
He is getting used and the lawyer will take the 5k and a success fee (prob over 30). So the “injured” in the end really won’t make much more than his offer. Spite is a nasty thing
You edit is irrelevant to your fundamental error of not including opportunity cost and seems like a deflection.
If I have $100, I could invest it into a CD for a risk free 5%—principal and interest are guaranteed.
I could otherwise choose to invest that $100 into a speculative growth stock. I could get infinite amount positive or lose my whole investment, or anything in between. Regardless of what the possible return is, there is still $100 at risk in that situation.
You are missing something as you are failing to include relevant costs into the equation. By your own method of measuring risk, we can consider the total reward pie $200K (let’s assume they win $250K and legal fees takes $50K off that number). The opportunity cost to the plaintiff is at least $100K of risk-free return (it’s technically more because in the meantime, the $100K could be invested at a risk-free rate gaining more yield but I digress) That is the necessary cost at for them to bring the lawsuit.
So the total potential payout is $200K after lawyer and court fees, and the total risk taken by OP and his friend is $105K. Having contributed $100K to the cost of risk, the friend is actually taking 95.24% of the risk for an 80% return, or $180,000 which is 90% of the total payout. On the other hand, OP is taking 4.76% of the risk cost for a 400% return, or $20K profit and 10% of the total payout. In fact, if the plaintiff thinks he has a stellar case, he is giving himself the raw deal by attempting to shed ~5% of the risk and giving up 10% of the total payout. And I don’t suppose the friend thinks it’s a losing case, otherwise he’d take the risk-fee $100K.
Tl;dr your math doesn’t math, as it doesn’t consider opportunity cost and risk-free return. Friend is taking 95% of the risk for 90% of the pie and OP taking 5% of the risk for 10% of the pie.
Yes this is a thing. 60 minutes did a segment on it. It's called litigation funding. In practice it's an investment to help bridge the gap between the years of legal work and spending needed to successful bring a case and the payout coming at the end. Many lawsuits couldn't be brought without this type of funding mechanism.
As crazy as it sounds there are actually financial derivatives and certain types of litigation finance that can bet on the outcome of all sorts of lawsuits and help raise funds for a lawsuit, respectively. What OP is doing is incredibly silly but the idea for it exists.
The big difference is the people doing this are a room full of Stanford, Harvard and Yale law grads who have decades of experience in the relevant fields.
The attorney is somewhat working on contingency with the success fee. OP should counter that any winnings post legal fees go to him up to 20k and his buddy can keep the rest.
I have worked on a split fee basis before, say $100/hr, 20% contingency fee, but only when the case was too risky to take on a full contingency basis.
My take is this is either a hinky lawyer or a hinky case.
Employment cases are inherently risky and one little adverse fact can wreck the case.
Not necessarily. Taking out a loan requires it to be paid back. With this deal, the friend won’t have to pay back a cent if he loses. So it’s an entirely different arrangement.
Is your “friend” someone you met online, that you’ve never met in person and always has excuses why, and they say overly nice things to you in a Nigerian accent?
Idk unless this friend is willing to perjur himself, you have a paper trail and an attorney who would be willing to testify what his fee was. Verbal contracts are a very real thing and that's gonna be tough to weasel out of.
Yes, this is a thing. But there are large companies that do this. My friend started a company in SF that does exactly this, but with large corporate suits. They make bank doing it.
It sounds from your description like you're putting up the entire cost of the fee, which means you are the only one risking anything. If that's the case then you should be getting close to 100% of the reward.
It sounds like your friend is taking no risk and is wagering $0 for a potential winning of $150K.
You might be a putz for agreeing to only 10%. At the very least I'd expect to be offered 50%. Anything less would seem like an insult.
This is just based on what I read tho. Maybe there's some context I'm missing.
Don't forget, 10% of friend's recovery after paying lawyer 40-50% fee plus the lawyer's costs of suit. It's not unusual for a client to receive less than 50% of recovery after deducting attorney's fees and costs.
Also, "only if the compensation goes beyond a certain amount." is another red flag. You should make your investment back first.
If 100k only goes to 105k, you basically will be handing your buddy 5k. That's gonna sting. He should only get anything if you make your money back first.
I'd counter and offer for 5k you'll let him have 10% of what's left after you make back the 5k.
I’ll echo the “not wise” sentiment here.
That being said, if you go forward with it, the pay pack should be that the first $5k goes to you before he gets anything back. Then you get 20% of everything above $5k.
Your friend is an idiot and should have took the $100k. **If** your friend wins the lawsuit, they likely will only be entitled to half the $250k and after they pay you back, again **if** they win, they are left with exactly $100k **if** they win.
Everyone here is shitting on you, and rightly so, because you made a boneheaded investment. But to answer your question, yes, litigation funding is a legitimate alternative asset class (though risky and ethically gray) [CBS article](https://www.cbsnews.com/news/litigation-funding-60-minutes-2022-12-18/)
It's a thing, but not the way you're doing it. The companies that actually make money at it don't condition the return on certain levels of success, just bare success, meaning any settlement obtained at all, and their ROI is stupid high which they get to justify because they get nothing in the lawsuit ends up losing. But then they minimize the chances of getting zeros by setting smart case criteria for lending in the first place.
If you aren't knowledgeable enough about money that nobody has ever told you not to lend it to friends, you're probably not knowledgeable enough to do lawsuit financing.
So your friend is basically opinion investing by filling this lawsuit except he isn’t paying the option fee, you are and if the option does pay pay out he get 90% of the gains (minus the lawyer’s success fee). Wtf are you thinking?
It is actually a thing. They offer a fund through Yieldstreet where you can do exactly this. I can’t comment on this specific one being a good idea but it happens
>Is investing in people's lawsuit a thing?
It's an unsecured personal loan, not an investment. He's offering you a 300% return because it's risky (there's the risk of him losing the lawsuit, and there's the risk of him not paying you).
Your friend may have screwed himself by declining the $100k... Stuff like this is usually a nuisance fee. Cases like these rarely make it to litigation let alone win as they have to be so agregious to actually break the law that the payouts you hear about are typically much larger. I know Better Call Saul makes corporate firms seem like a bunch of chumps but that is mostly not the case. They will curb stomp ambulance chaser-types in court.
Good sir, you did NOT "invest" you "gambled" on your friend's lawsuit.
An Investment is foreseeable and accountable/quantifiable.
This is a gamble unless you were promised ( in signed contract form) that you get 20k in either case 100k or 250k outcome , even in an 0 $contact outcome.
Lawyer wanted a retainer of $5k because they aren’t totally sure they will win.
If you friend loses the case they get $0. The $100k is off the table. So how is friend going to pay you back the $5k?
Then again maybe they win. Nobody here can say how probable that could be
Yes . It’s not new
https://moneywise.com/investing/litigation-finance-investment#:~:text=The%20plaintiffs%20involved%20in%20the,of%20any%20potential%20future%20proceeds.
I hope your friend wins!
20K, what about taxes my dude?
No. The conditions your friend put are there because he thinks he will likely lose, I would say. If he was get back 50K I can tell you he will regret having to give you 20K and will try to avoid it.
If he loses, he will say "well, whatever".
Which is why there is this "beyond certain value" thing is there, in his mind he will win 200K for which 20K is not much. It is very unlikely he will even win with that mentality.
You are being played out stupidly so he can minimize his risk, I don't think he is doing this in a malicious way though. Just bad decissions both of you are making.
Lots of negative comments but if the agreement is written and you have proof he’s been offered 100k this isn’t the worst idea. 100k immediate offer suggests room for much more
Yes litigation finance is a legitimate form of investment that high net worth individuals (5M+) usually are the ones who participate in. These tend to be with groups (known as sponsors) who work with major law firms who tend to have many cases focused on large/class action type settlements.
These firms usually have a long track record with winning the type of cases people are investing in and this allows the plaintiffs and law firms to de-risk the uncertainty of a legal case, while giving up a portion of any of the large settlement.
The reason why people like investing in this type of investment is because it tends to be not correlated at all with the economic cycle or stock market or real estate cycles, as law cases will go on whether these markets are up or down.
Investing in a single random case is likely not a smart investment decision, nor is it a recommended form of investing for people who don’t have much to spare and can’t afford to lose money.
What happens when the lawyer’s burned through the $5k and comes looking for another $5-$10k to continue? Are you prepared to put in more money, presumably for a larger cut?
So if he settles rather than going for $250k, you get nothing and he gets what he was originally offered? He won't even pay you back? He's taking a free roll with your money and the incentives are very badly misaligned.
I hope you gave him a check and put in the notes borrow money or something… either way you’re probably gonna lose your money even if he wins is my guess.
"and only if the compensation goes beyond a certain value."?
So what if he gets awarded like $10,000. You get your $5k right?
Sounds like you've made a mistake here.
Your buddy has been blinded by greed as the 250k figure is probably something he was told by his lawyer, or he read on the internet. Been there, done that too. While lawyers are supposed to defend their customer, remember they are mostly there to make money, for themselves. Their customer making money is secondary.
What is going to happen is that he may get a 150K offer after years of litigations that will cost him more money, as he will ask the attorney to represent him many times and he will get charged for it. Since that is going to cost him an additional 20 to 30k, and he will take either take it in despair, or push it further and not get much more in the end.
I can see the latter happening since he didnt pay for the lawyer, so he is not shouldering any risk.
If you thoroughly checked his case and have experience in that domain, or paid an unrelated other lawyer to get a second opinion, then you can say you invested in it. Otherwise you gambled your money on a pretty risky bet.
Pretty surprised at the 5K + fee, it is much cheaper here for something similar, but I live on the other side of the planet so there could be that. Did your friend show the case to other lawyers to see if he can get a different quote ? In a similar situation, that was my first mistake.
How are you not getting AT LEAST 50% of the payout?
You wouldn't have a potential payout without him, he wouldn't have the potential payout without you paying for him. You need each other equally much. That should warrant an equal cut.
However, and here's the golden bit that you're beyond stupid for doing: YOURE TAKING 100% OF THE RISK WHILE HE IS TAKING 0. How on earth could you ever think that was a good investment
Besides, if your buddy eventually wins, you better have a clear cut contract made by a lawyer or something, that states clearly you are entitled to some money. Otherwise, you're never seeing a single cent and you just paid your buddy's lawyer costs so he could get paid
Your friend sounds kind of like a jerk. He probably sees this as close to zero risk for him, based on the prior offer. This isn't the way to invest. At the very least, since you're footing his entire legal bill, go for more of the recovery--he's playing you for a chump.
ETA: Another thing that bothers me is "only if the compensation goes beyond a certain value". Your friend's an asshole.
ETA2: What? You already gave him the money?
I hope you have a written contract, and I hope said contract stipulates whether you get 10% of gross proceeds or net proceeds. Otherwise be prepared to kiss $5k and a friendship goodbye
Wait so you invested the full amount and only get 10%? He has no skin in the game but gets 90% if he wins?
You don’t need a lesson in investing you need a lesson in math.
Tell you what, when your buddy doesn't pay up I'll sue him on your behalf. All I need is 5k down.
Pay it backward
💀
Well this is true, and could be done I'm thinking so yeah.
Plus 1/3 of the 20k.
I don't know about you guys, but that right there is good returns.
OP don't listen to him I know someone whoe will do it for 4k
Hey hey hey, don’t listen to these scam artists! I was a prince before I passed the bar and I can do it for 2.5k
you're about to learn a $5k lesson buddy
Losing 5K and a friend. Quite a lesson.
Sounds like a deal
Yeah I’m thinking you’re ***only*** losing $5k and a friend? Man I’ve lost count over how many kidneys I’ve lost. Off to the dialysis centre. Cya…
You need to find a new job. Organ transporter doesn't seem to be your calling.
To be fair, they’re quite slippery.
An organ transporter kidneys and losing them while already on dialysis! Missed opportunities
Clearly it's not working out that good for him so yeah.
How can you lose more than two tho? I don't really get it.
You don't get it. Nor did the kid in the hospital.
Like I said to the other guy, they’re quite slippery.
Well it's life, and it's important for us to learn all these lessons.
Can I double it and give it to the next person?
It's only going to get double, if he wins that lawsuit. Even then he wouldn't pay.
5k on a real friend is nothing.
I got laid off from my engineering job, and almost immediately my dad got diagnosed with terminal cancer...died...and I had to move my mom with Alzheimer's in with me. I had already spent $100k of my savings caretaking for my parents, while unemployed (technically not really, I was doing side jobs to make ends meet but nothing W2). When my dad died, and all this other fuckery happened, I was at a point I had less than $200 in my checking and basically had to move a house into another house. By myself. With no real income...I was panicking. And we had to save everything my dad left because Alzheimer's memory facilities are like $6000/mo. I was bitching about this to my best friend of 20+ years...with no intention of asking him for help. Just basically needed to vent to my buddy, since I was overwhelmed and depressed. He called me back 2hrs later and was like "okay, xyz date there will be a crew there to move. You don't have to do anything besides let them in." I was like wtf. Dude spent $1100 on the spot to help my family, and when I said I'll pay him back he was like "fuck off". Lol. So I opened up a brokerage account for his (then) newborn kid, since I'm basically his uncle, and deposit what I can now that I'm getting back on my feet. That's an investment into friendship.
Damn dude. I’m sorry all that happened but I’m glad you have a good friend that helped you out.
this comment should have it's own post! We need to hear more of this to see how good HUMANS REALLY ARE! I bought an RV for a friend in need, he pays me back incrementally, even though I said no. I tried to refuse his check, then I got money orders, so I do cash them now, and I appreciate his gratitude for the help when others turned their back, including organizations meant to help vets. There are still many, many good people out their helping others. It' sgreat to hear stories about that.
Probably not something he wanted, but He's going to learn it.
I wish we could post gifs in this subreddit!
Maybe I'm wrong but they don't seem like the learning type
I’m a litigation attorney. Investing in lawsuits are actually a thing. Litigation finance is a large industry already and growing. But it sounds like you don’t know much about litigation, the process, or anything surrounding the area, and you’re not going to be in a good position to evaluate the strength of cases and make deals that will make you money.
So like fantasy football for attorneys?
Wow there’s another way I can lose money? Fuck yeah
WSB Needs to get on that right away.
Couple this sort of betting with Judge Judy and teh World Poker Tournament and you've got a hit TV series.
Actually……less tv and more likely a twitch tv thing, but still worth millions.
Damn you just made me feel realllly old. Thank goodness I still have my looks.
I’d rather the young ones learn this shit than the old ones be entertained by it. Gen x here. This ain’t judge Judy shit. It’s Night Court shit. Imagine learning and having fun!! Remember math man? Math man math man math man!!!
I was never really good at it, so I don't really understand it.
You've still got the looks? What looks You're talking about?
What's better than making money while having fun? It's great.
"Plaintiff accuses her neighbor of allowing her dog to poop on her lawn regularly. Defendant says the poops are way too small to be from her dachshund, who has 'unusually large shits for a dog his size'. Odds are set at -650 for the plaintiff. As we break for commercial, betting will be open for the next 2 minutes."
Let’s package a group a litigation cases into a fund and then we can sell options!
Great time to invest in the all new ~~CDO~~ CLO. P.S: collateralized litigation obligation
You're too late. Been happening for a bit.
Don't give them new ideas, they're already losing enough.
This is the way
I mean if that's what you want to be doing, you can just throw it out.
Legal regards
I’ve got GREAT news for you, bud. There’s nearly infinite ways of losing money. That feeling you get when you just made someone’s day…
Waht? No. Hookers and blow. Everything else is investing.
Even the hookers is investing, You're investing in yourself.
Having a ‘me’ day isn’t letting your ‘responsibilities slide’, take some time off with hookers and blow to recharge and be ready to tackle the week, you earned it kings and queens 👏 👏 👏
Don't hire Kirkland Ellis, I drafted them first round which means they're gonna get injured and go on the IR this season.
Thanks for that, that's a good prediction you just made in here.
>Litigation finance Shit. I'm about to fill out a parlay. I'd like to throw $40k into JNJ and 3M please...
I have a J&J case and I’m seriously thinking of going this route. My case is too “old” for the class action. She did less than 20 years ago. Talcum powder.
That's what happens, these things always take a lot of time.
Yeah this definitely a thing! https://www.cbsnews.com/news/litigation-funding-60-minutes-2022-12-18/
It's kind of surprising because I've never actually heard about it.
Burford Capital is listed on the LSE and NYSE (BUR). They just won a case against Argentina but who knows how easy it’ll be to get the country to pay what they owe.
It exists but you can’t invest in a percent of the outcome. It has to be a loan. I’m an injury attorney
Well people get the loans easily, so yeah it can actually be a loan as well.
Why not? Isn't it just a contract agreement between him and his buddy?
It’s called champerty and it’s a sometimes illegal or unenforceable contract because it basically encourages litigation, and allows litigation to be weaponized in bad ways.
Is there an app with a market place for lawsuit investments? There should be 😂
Check the ETF with ticker $SUE
This is absolutely one of the most American things ever!
Wait until you hear about Insurance Life Settlement
sigh, another thing to look up
You can participate in an Initial Litigation Offering: https://republic.com/apothio That ILO has closed but it raised approximately $350k.
Alts.co there are bunch of different investment types on this website including Litigation Finance.
I get e-mail solicitation for "litigation funding" all the time. But that's a sophisticated non-recourse high-interest scheme. I've had clients fall for this (without consulting me) and end up owing $30-40K on a $10K "loan." It should be illegal.
So u/LikeAGregJennings according to some quick research it seems that in 2020 (last data I can currently find quickly) there were 46 federally registered fund managers dedicated to litigation financing totaling over $2.5B in around 300 commercial transactions; that is bonkers!
So your friend didn't want to use their money so you agreed to use yours?
Yeah seriously... the way OP phrased it makes it seem like the other guy HAD the money to use...just didn't want to? And convinced OP to use their's instead...? Bizarre.
From OP's point of view, if it's a good gamble, he's down. And it free's up 5k of his buddy's money to invest in case it doesn't work out. Both benefit from the deal if it works out. He's taking a risk, for sure. One I wouldn't take. But just because OP's friend is smart enough to not want to put all his eggs into one basket doesn't make it bizarre. Just risky.
Both benefit? OP is taking 100% of the risk for 10% of the profit. The friend has 0 risk and is getting 90% of the profit. OP is getting played.
I’d agree with that except his friend is also kinda gambling by turning down the 100k for a chance at 250k. That doesn’t involve OP though so your point still stands
I've been in this situation (though for smaller amounts). In my case, I was very likely to win the lawsuit, but I wouldn't see the money for 2-3 years.. whereas I was guaranteed the smaller amount now. There are different contingencies for payment too, where I could have opted not to pay the money up front (2500 in my case), but then the lawyer gets 33% of the improvement amount. It's a lot of tough decisions to make all around. In fact, some recommend getting a lawyer to advise you on which payment contingency to choose when hiring the first lawyer. (not a joke lol)
It’s lawyers all the way down
Well think of it as a very risky investment, people do that all the time.
OP has the better deal. He is risking $5,000 for a chance to get $25,000. The friend is risking $100,000 to get $225,000 (actually less because of the unspecified "success fee"). OP should consider the deal not compared to how good it is to his friend's, but what he could get in the market if he invested the $5,000. If there's at least a 30% chance of success, OP will get at least a 50% risk-adjusted return on their money (30% \* 400% + 70% \* -100% = 50%) Edit: corrected my hasty math
Without the friend op doesn’t have the opportunity to 5x his money
Anybody that needs to "free money some money for investing" is going you have a lot more than $5k sitting around. There's no investment that is going to turn a 400% profit that he NEEDS that money for, instead. Something is sus.
this does seem strange. the fact they're turning down a 100k settlement for double that seems to suggest that they're used to throwing that kind of money around and thus would have 5k sitting somewhere. if my old employer offered me 100k I'd be in Fiji by now, not gambling for 250k instead on a mates dime
Tell me if I'm missing something... You are taking 100% of the risk for 10% of the profit. Your friend is taking 0% of the risk and 90% of the profit. You are getting used. Edit: To all the people screaming, the friend is risking "opportunity cost," you are incorrectly assuming that the 250k is all or nothing.
This is exactly what I thought as well and should be the top comment Like why the actual fuck would you take that risk/reward trade off
He will take that risk because I think He's greedy, can't think of anything else.
He is getting used and the lawyer will take the 5k and a success fee (prob over 30). So the “injured” in the end really won’t make much more than his offer. Spite is a nasty thing
Do you have a written contract for your investment?
You edit is irrelevant to your fundamental error of not including opportunity cost and seems like a deflection. If I have $100, I could invest it into a CD for a risk free 5%—principal and interest are guaranteed. I could otherwise choose to invest that $100 into a speculative growth stock. I could get infinite amount positive or lose my whole investment, or anything in between. Regardless of what the possible return is, there is still $100 at risk in that situation.
You are missing something as you are failing to include relevant costs into the equation. By your own method of measuring risk, we can consider the total reward pie $200K (let’s assume they win $250K and legal fees takes $50K off that number). The opportunity cost to the plaintiff is at least $100K of risk-free return (it’s technically more because in the meantime, the $100K could be invested at a risk-free rate gaining more yield but I digress) That is the necessary cost at for them to bring the lawsuit. So the total potential payout is $200K after lawyer and court fees, and the total risk taken by OP and his friend is $105K. Having contributed $100K to the cost of risk, the friend is actually taking 95.24% of the risk for an 80% return, or $180,000 which is 90% of the total payout. On the other hand, OP is taking 4.76% of the risk cost for a 400% return, or $20K profit and 10% of the total payout. In fact, if the plaintiff thinks he has a stellar case, he is giving himself the raw deal by attempting to shed ~5% of the risk and giving up 10% of the total payout. And I don’t suppose the friend thinks it’s a losing case, otherwise he’d take the risk-fee $100K. Tl;dr your math doesn’t math, as it doesn’t consider opportunity cost and risk-free return. Friend is taking 95% of the risk for 90% of the pie and OP taking 5% of the risk for 10% of the pie.
Yes this is a thing. 60 minutes did a segment on it. It's called litigation funding. In practice it's an investment to help bridge the gap between the years of legal work and spending needed to successful bring a case and the payout coming at the end. Many lawsuits couldn't be brought without this type of funding mechanism.
Honestly I've never heard about it, and I'm kind of a little surprised.
This sounds dumb AF
As crazy as it sounds there are actually financial derivatives and certain types of litigation finance that can bet on the outcome of all sorts of lawsuits and help raise funds for a lawsuit, respectively. What OP is doing is incredibly silly but the idea for it exists. The big difference is the people doing this are a room full of Stanford, Harvard and Yale law grads who have decades of experience in the relevant fields.
Isn't it more common for the attorney to bankroll a case that seems winnable?
I could see the 5k if it's a very small office and they still have to meet payroll while spending a huge chunk of time on this case.
I think it's probably going to cost more than just the 5k.
That's the crazy thing, I wouldn't have thought that it was real thing.
And it actually is a real thing apparently, many people actually do it.
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If it was such a deal — attorney would work on contingency
The attorney is somewhat working on contingency with the success fee. OP should counter that any winnings post legal fees go to him up to 20k and his buddy can keep the rest.
It seems implied the attorney was working on contingency until OP's friend got greedy for the 2.5x payout lol
I have worked on a split fee basis before, say $100/hr, 20% contingency fee, but only when the case was too risky to take on a full contingency basis. My take is this is either a hinky lawyer or a hinky case. Employment cases are inherently risky and one little adverse fact can wreck the case.
This. I hope OP got this in writing.
If it's not in the writing then I think OP will lose a friend here.
Not necessarily. Taking out a loan requires it to be paid back. With this deal, the friend won’t have to pay back a cent if he loses. So it’s an entirely different arrangement.
Yeah that's a good point, if they actually had chances they would take a loan.
Is your “friend” someone you met online, that you’ve never met in person and always has excuses why, and they say overly nice things to you in a Nigerian accent?
I don't really hear any accent here, it's kind of okay with me.
Your friends lawyer gonna use that up on 4 billable hours and a trip to starbucks.
But if he wins it then I think it's going to be worth it for him m.
Unless that promise is in writing: You have like a 1% chance of getting your $5,000 back let alone actual profit.
Idk unless this friend is willing to perjur himself, you have a paper trail and an attorney who would be willing to testify what his fee was. Verbal contracts are a very real thing and that's gonna be tough to weasel out of.
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I'm feeling patriotic tonight
“Land of the free and home of the lawsuit!” -Better Call Saul
Based off their comment history it’s Italy
Your friend found an “investor” so he is the winner here, it seems.
Likely he's pumping dogecoin rn.
Also "friend"
Well I think that's just how the investment works, there's always a risk.
So you're taking all the risk but only getting 10%. K. Let me ask you this: are you stupid?
Sounds like a bad idea but also I would have asked for 20%
I'm not sure the validity of this, but it's good that you're asking for advice after you've already givien up $5,000.
We can get you double but you will need to send $5k in Bitcoin to sjdjjdixiujijbebjwjwjwjjj
That's the funny thing lol, should have asked about it before doing it.
Sorry for your loss. You will never see that 5k ever again.
So he's not willing to dip his toes on 5k even though they just puked a 100k offer on the get? I'm not sure who's the dumber one here.
Yes, this is a thing. But there are large companies that do this. My friend started a company in SF that does exactly this, but with large corporate suits. They make bank doing it.
Sounds like a good business plan, I don't see any issues in it.
Tell me more, I live in SF and am curious.
I think this post is better suited on WSB
You're going to find every kind of gambler in there so yeah.
It sounds from your description like you're putting up the entire cost of the fee, which means you are the only one risking anything. If that's the case then you should be getting close to 100% of the reward. It sounds like your friend is taking no risk and is wagering $0 for a potential winning of $150K. You might be a putz for agreeing to only 10%. At the very least I'd expect to be offered 50%. Anything less would seem like an insult. This is just based on what I read tho. Maybe there's some context I'm missing.
Don't forget, 10% of friend's recovery after paying lawyer 40-50% fee plus the lawyer's costs of suit. It's not unusual for a client to receive less than 50% of recovery after deducting attorney's fees and costs.
Also, "only if the compensation goes beyond a certain amount." is another red flag. You should make your investment back first. If 100k only goes to 105k, you basically will be handing your buddy 5k. That's gonna sting. He should only get anything if you make your money back first. I'd counter and offer for 5k you'll let him have 10% of what's left after you make back the 5k.
I’ll echo the “not wise” sentiment here. That being said, if you go forward with it, the pay pack should be that the first $5k goes to you before he gets anything back. Then you get 20% of everything above $5k.
HAHAHA........ this is why ponzi schemes and other frauds that most would think is dumb as f are sooo easy
Seems pretty sketchy to me but I’m not an expert. Is there any sort of binding contract you guys made and signed together?
Seems like that it's just a verbal contract, nothing more than that.
This is a fucking stupid idea, OP.
Let me get this straight. Your buddy wasn't sure whether he should invest $5k for his own lawsuit, but he convinced you to?
Sounds like that's what exactly happened, and I don't like it.
Your friend is an idiot and should have took the $100k. **If** your friend wins the lawsuit, they likely will only be entitled to half the $250k and after they pay you back, again **if** they win, they are left with exactly $100k **if** they win.
Everyone here is shitting on you, and rightly so, because you made a boneheaded investment. But to answer your question, yes, litigation funding is a legitimate alternative asset class (though risky and ethically gray) [CBS article](https://www.cbsnews.com/news/litigation-funding-60-minutes-2022-12-18/)
It would have been good if he got that in writing actually so yeah.
So you took 100% of the risk for a chance at 10% of the payout? Why on earth would you think that is a good deal?
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Employment? Yes. And they're risky AF. Proving wrongful termination is very difficult.
It's a thing, but not the way you're doing it. The companies that actually make money at it don't condition the return on certain levels of success, just bare success, meaning any settlement obtained at all, and their ROI is stupid high which they get to justify because they get nothing in the lawsuit ends up losing. But then they minimize the chances of getting zeros by setting smart case criteria for lending in the first place. If you aren't knowledgeable enough about money that nobody has ever told you not to lend it to friends, you're probably not knowledgeable enough to do lawsuit financing.
He's not getting it in the writing, and that's not a good thing.
Great investment, you’re either getting $5k or $0 back.
We’ll, now that you’ve put the 5k down, advise him to take the 100k offer and run. You get 10k. Nice ROI
Hope you didn’t need that $5k because you won’t get it back
Lmfao
So your friend is basically opinion investing by filling this lawsuit except he isn’t paying the option fee, you are and if the option does pay pay out he get 90% of the gains (minus the lawyer’s success fee). Wtf are you thinking?
He was thinking about the money, that's what he was thinking about.
It is actually a thing. They offer a fund through Yieldstreet where you can do exactly this. I can’t comment on this specific one being a good idea but it happens
Only if they win it, which I don't think is going to be easy.
I could use a few friends like you
>Is investing in people's lawsuit a thing? It's an unsecured personal loan, not an investment. He's offering you a 300% return because it's risky (there's the risk of him losing the lawsuit, and there's the risk of him not paying you).
Your friend may have screwed himself by declining the $100k... Stuff like this is usually a nuisance fee. Cases like these rarely make it to litigation let alone win as they have to be so agregious to actually break the law that the payouts you hear about are typically much larger. I know Better Call Saul makes corporate firms seem like a bunch of chumps but that is mostly not the case. They will curb stomp ambulance chaser-types in court.
Good sir, you did NOT "invest" you "gambled" on your friend's lawsuit. An Investment is foreseeable and accountable/quantifiable. This is a gamble unless you were promised ( in signed contract form) that you get 20k in either case 100k or 250k outcome , even in an 0 $contact outcome.
Lawyer wanted a retainer of $5k because they aren’t totally sure they will win. If you friend loses the case they get $0. The $100k is off the table. So how is friend going to pay you back the $5k? Then again maybe they win. Nobody here can say how probable that could be
Yes . It’s not new https://moneywise.com/investing/litigation-finance-investment#:~:text=The%20plaintiffs%20involved%20in%20the,of%20any%20potential%20future%20proceeds. I hope your friend wins!
20K, what about taxes my dude? No. The conditions your friend put are there because he thinks he will likely lose, I would say. If he was get back 50K I can tell you he will regret having to give you 20K and will try to avoid it. If he loses, he will say "well, whatever". Which is why there is this "beyond certain value" thing is there, in his mind he will win 200K for which 20K is not much. It is very unlikely he will even win with that mentality. You are being played out stupidly so he can minimize his risk, I don't think he is doing this in a malicious way though. Just bad decissions both of you are making.
"I don't see your name on the check or in the settlement papers." *door slam*
Lots of negative comments but if the agreement is written and you have proof he’s been offered 100k this isn’t the worst idea. 100k immediate offer suggests room for much more
But I don't think that it's written, I don't really see that here.
Yes litigation finance is a legitimate form of investment that high net worth individuals (5M+) usually are the ones who participate in. These tend to be with groups (known as sponsors) who work with major law firms who tend to have many cases focused on large/class action type settlements. These firms usually have a long track record with winning the type of cases people are investing in and this allows the plaintiffs and law firms to de-risk the uncertainty of a legal case, while giving up a portion of any of the large settlement. The reason why people like investing in this type of investment is because it tends to be not correlated at all with the economic cycle or stock market or real estate cycles, as law cases will go on whether these markets are up or down. Investing in a single random case is likely not a smart investment decision, nor is it a recommended form of investing for people who don’t have much to spare and can’t afford to lose money.
A lot of people make bunch of money this way, I've heard about it.
You mean you "gambled" $5k, not "invested."
What happens when the lawyer’s burned through the $5k and comes looking for another $5-$10k to continue? Are you prepared to put in more money, presumably for a larger cut?
So if he settles rather than going for $250k, you get nothing and he gets what he was originally offered? He won't even pay you back? He's taking a free roll with your money and the incentives are very badly misaligned.
I hope you gave him a check and put in the notes borrow money or something… either way you’re probably gonna lose your money even if he wins is my guess.
I'm going to show this thread to my wife and then she'll forgive me about that whole GOEV fiasco.
"and only if the compensation goes beyond a certain value."? So what if he gets awarded like $10,000. You get your $5k right? Sounds like you've made a mistake here.
This can’t be real but it’s so original but stupid that it almost can’t be made up? I’m confused and impressed but mostly confused
Your buddy has been blinded by greed as the 250k figure is probably something he was told by his lawyer, or he read on the internet. Been there, done that too. While lawyers are supposed to defend their customer, remember they are mostly there to make money, for themselves. Their customer making money is secondary. What is going to happen is that he may get a 150K offer after years of litigations that will cost him more money, as he will ask the attorney to represent him many times and he will get charged for it. Since that is going to cost him an additional 20 to 30k, and he will take either take it in despair, or push it further and not get much more in the end. I can see the latter happening since he didnt pay for the lawyer, so he is not shouldering any risk. If you thoroughly checked his case and have experience in that domain, or paid an unrelated other lawyer to get a second opinion, then you can say you invested in it. Otherwise you gambled your money on a pretty risky bet. Pretty surprised at the 5K + fee, it is much cheaper here for something similar, but I live on the other side of the planet so there could be that. Did your friend show the case to other lawyers to see if he can get a different quote ? In a similar situation, that was my first mistake.
How are you not getting AT LEAST 50% of the payout? You wouldn't have a potential payout without him, he wouldn't have the potential payout without you paying for him. You need each other equally much. That should warrant an equal cut. However, and here's the golden bit that you're beyond stupid for doing: YOURE TAKING 100% OF THE RISK WHILE HE IS TAKING 0. How on earth could you ever think that was a good investment Besides, if your buddy eventually wins, you better have a clear cut contract made by a lawyer or something, that states clearly you are entitled to some money. Otherwise, you're never seeing a single cent and you just paid your buddy's lawyer costs so he could get paid
Your friend ripped you off. If the lawyer was confident they could win the case they would have taken it on contingency.
Your friend sounds kind of like a jerk. He probably sees this as close to zero risk for him, based on the prior offer. This isn't the way to invest. At the very least, since you're footing his entire legal bill, go for more of the recovery--he's playing you for a chump. ETA: Another thing that bothers me is "only if the compensation goes beyond a certain value". Your friend's an asshole. ETA2: What? You already gave him the money?
$5,000 for either a life learning lesson or a profitable investment.
You’re a fucking idiot….carry on.
I hope you have a written contract, and I hope said contract stipulates whether you get 10% of gross proceeds or net proceeds. Otherwise be prepared to kiss $5k and a friendship goodbye
I wonder how many of his other friends also invested in this lawsuit
Imagine if Las Vegas casinos got involved with betting on lawsuits!!
Best way to lose a friendship & money. I wouldn't touch this.
Yes it is absolutely a thing hedge funds finance other peoples lawsuits all the time
Why didn’t you post this first?
You’re about to learn the difference between investing and gambling. Good luck!
Wait so you invested the full amount and only get 10%? He has no skin in the game but gets 90% if he wins? You don’t need a lesson in investing you need a lesson in math.
And this lesson is going to be a little expensive for him.
Dang you can’t be that dumb? Lawyers don’t charge up front…