Ava Labs Brings Litigation Financing to its Blockchain

Ava Labs is launching a new kind of token, designed to bring the “$10B asset class of litigation financing” to the Avalanche blockchain, the firm said in a blog post on 14 December.

The new offering, titled Initial Litigation Offering (ILO), was developed by Ava Labs, law firm Roche Cyrulnik Freedman LLP, and consultancy firm Republic Advisory Services. Litigation financing allows investors to cover the costs of a lawsuit, in return for a portion of the payout once the case has been won. The co-founder and COO of Ava Labs, Kevin Sekniqi, commented on this lucrative form of investment, saying:

“They are fundamentally unique from any other investments, and the creation of the ILO marks the first time blockchain technology will be used to democratize financial products at a multi billion-dollar scale.

The firm’s new platform will allow individuals to raise the funding needed to pursue litigations, by tokenizing an economic right to a portion of potential financial earnings that might come from the claim. Similarly to ICO’s there is a risk to investors, as they basically bet on the outcome of the litigation.

The blog post gave LexShares, a leading litigation fund, as an example in order to show the potential of the Avalanche ILO platform. Back in June, CNBC reported that LexShares had already invested in over 100 cases since 2014, 43 of which have been resolved with a 70% win rate. This has generated the company a “median annualised return after fees and expenses” of 52%, beating many hedge funds.

The first ILO to be made available on the Avalanche blockchain is connected to the wholesale destructions of personal property by government entities in the U.S.. The plaintiff in the case, Apothio LLC, had 500 acres of “legally grown hemp farms” — estimated to be worth at least $1 billion — destroyed by the Kern County Sheriff’s Office. The ILO is expected to start sometime in the first quarter of 2021.