Crypto Investors Crowdfund Hemp Company’s Civil Suit In World-First

Industrial hemp research, development and commercialisation institution, Apothio LLC, is seeking up to US$1B in damages from the Kern County Sheriff’s Office over what is alleged to be ‘the largest wholesale destruction of personal property by government entities in the history of the United States’. 

Represented by Roche Cyrulnik Freedman LLP – an NYC law firm specialising in high-stakes cryptocurrency and cannabis cases – Apothio claims that, in late October of 2019, the Kern County Sheriff’s Office ‘deliberately and wrongfully’ bulldozed roughly 450 acres (~180 hectares) of hemp crop intended for research and commercial purposes.

ILOs: Initial Legal Offerings

Lacking both capital and funding, Apothio took a never-before-seen legal recourse – crypto-crowdfunding. Ryval – ‘the stock market of litigation financing’ – is a startup, founded by members of Roche Cyrulnik Freedman LLP, bringing this potential to reality. 

Utilising a first-of-its-kind tokenised asset for litigation financing – ILOs (Initial Legal Offerings) – crypto traders have been given the opportunity to not only fund but invest in Apothio’s case. Should Apothio win its suit, investors will receive a relative portion of the damages (with a potential return of up to 3.5x). If not, their money covers court costs.

On January 4th, Apothio surpassed their minimum goal of US$250k, with 93 days left to hit their maximum goal of $5m USD. This case marks the first time a civil action has been partially financed in a tokenised offering. 

Implications for our legal systems

Kevin Sekniqi (Co-Founder and COO of Avalanche – the blockchain on which ILOs are minted) stated that ILOs are ‘fundamentally unique from any other investment’ and represent ‘the first time blockchain technology will be used to democratize financial products at a multi-billion-dollar scale.’ 

What Sekniqi is referring to is the way this case sets a groundbreaking precedent for participation in the world’s legal systems.  Court costs are infamously steep and represent an often insurmountable barrier to justice, but ILOs can help those in need of legal funding access remediation they otherwise wouldn’t, relative to the perceived strength of their case.

Litigation financing is historically one of the most performant asset classes, worth over $10B USD globally, and regularly offers returns that make those from hedge funds and the stock market look like chump change. However, it’s also one of the most historically inaccessible for investors. 

Before Ryval, only wealthy traders with securities not tied to financial regulators were able to participate. It simply wasn’t a viable option for retail investors who would find it difficult enough to source these opportunities anyway. ILOs open the door for these investors, prioritising the free market by tokenising a previously unrealisable economic and democratic right to participation in the litigation financing process.

ILOs are just one of many ways in which blockchain technology is reshaping the way we perceive and approach our legal structures. You really only need to look to smart contracts to see the massive potential for change. 

It’s clear that we’re seeing early success in the adoption of ILOs, and we may well see more as Apothio v. Kern County plays out and other legal teams adopt crypto-crowdfunding for their litigation financing. It’s a brave new world for the legal sector.