By Louis Goss
The collapse of Silicon Valley Bank poses a “tremendous opportunity” for more lawsuits, funder Litigation Capital Management (LCM) has said.
The firm is readying itself to profit on an uptick in bankruptcies as the global economy hits a slump, the company’s chief executive has said.
The Australian financier, that in February made £7m in profits by funding Carillion’s claim against KPMG, said it is now primed to capitalise on cases surrounding the recent wave of corporate insolvencies, including around the collapse of Silicon Valley Bank.
LCM chief executive Patrick Moloney told City A.M. the global economic downturn will boost demand for the litigation funder’s capital as external liquidators seek out third-party funding to pursue their claims.
Moloney said the collapse of Silicon Valley Bank last Friday will lead to a “myriad of litigation” as he argued the global economic downturn presents a “tremendous opportunity” for LCM.
The company chief executive said the rise of UK class-action lawsuits will also bolster LCM’s business, as he explained that new laws that let British consumers push ahead with collective lawsuits have created a new wave of competition claims.
“This is a really change in the law that’s allowing those claims to come through,” Moloney said, as he explained those claims on a “standalone basis would be utterly impossible to do”.
The company chief argued City lawyers are now increasingly coming to understand the litigation funding sector in making greater use of its services. “There’s recognition amongst lawyers that it’s a really valuable tool to be utilising,” Moloney said.
Moloney’s comments come as LCM today posted what it described as record growth, despite posting a £3m loss for the year ending on 31 December 2022.
The LCM chief said the 2022 loss is a result of the nature of the litigation funding business that sees funds bankroll lawsuit on a multi-year basis, with a view to eventually taking a cut of any winnings achieved through the claim.
Moloney said that the two payouts LCM achieved in the first few months of 2023 – including the payout from KPMG – would have swung the fund back into profit, if they had been included in the firm’s 2022 results.
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