Litigation funders have found themselves carrying the fallout of speculative and controversial cases with the industry’s dedicated litigation funders in retreat. Who is to blame? Lawyers selling rosy dreams to funders, or funders eager to exploit any case for profit? Image Source: Freepik

After years of presenting themselves as masters of sophisticated risk analysis, some of the industry’s biggest players now appear to be discovering that betting on legally dubious billion-dollar lawsuits can occasionally backfire.

Speaking to the Law Society Gazette, Susan Dunn—chair of the Association of Litigation Funders of England and Wales and founder of Harbour Litigation Funding—admitted lawyers routinely exaggerate claim values while minimizing how long cases are likely to drag on. Put bluntly, litigation funders are being pitched fantasy valuations wrapped in legal jargon and sold as credible investments.

Yet the industry has little right to act blindsided. Third-party litigation funding has spent years chasing colossal payouts while treating catastrophic risks as an acceptable cost of doing business. The logic was always brutally simple: one monster payday could offset countless failures. That mentality was on full display in the deeply controversial Sulu arbitration, where Therium Capital Management reportedly invested around $20 million in pursuit of a cut from a staggering $15 billion award. For an industry obsessed with “disruption,” it turns out the business model often resembled little more than buying lottery tickets in courtrooms.

“Litigation funding has spent years chasing colossal payouts while treating catastrophic risks as an acceptable cost of doing business. The logic was always brutally simple: one monster payday could offset countless failures.”

Critics argue this jackpot-driven culture inevitably encourages weak due diligence and reckless case selection. A source familiar with the matter claimed firms Therium appeared fixated only on projected success rates while paying little meaningful attention to who their clients actually were or whether the legal claims themselves could survive serious scrutiny.

The Sulu case remains one of the clearest examples of those concerns. The claimants are not universally recognized as legitimate heirs to the former Sultanate of Sulu, and they reportedly were not even receiving the symbolic payments from Malaysia before those payments ceased after 2013—despite those payments forming the central foundation of the lawsuit. More explosively, lead claimant Fuad Kiram has been designated a terrorist and linked to militant groups. For an industry that prides itself on exhaustive vetting and sophisticated analytics, these are not exactly minor details to overlook.

Dunn also highlighted another glaring weakness inside the industry: law firms allegedly often fail to verify whether litigation funders even possess the financial resources necessary to sustain the cases they bankroll. Combined with wildly unrealistic timelines and inflated projections, the result is an industry repeatedly facing questions about its own financial fragility while marketing itself as a polished alternative asset class.

The cracks have already begun to show. Therium eventually retreated from directly funding clients after significant layoffs and the transfer of cases to Fortress Investment Group. Meanwhile, litigation finance giant Burford Capital saw its share value cut roughly in half following a major setback tied to litigation involving Argentine energy company YPF. Once again, the lure was the possibility of an enormous windfall tied to claims reportedly worth around $18 billion. The promise of easy billions has proven remarkably effective at convincing funders that ordinary caution is for other people.

“Burford Capital saw its share value cut roughly in half following a major setback tied to litigation involving Argentine energy company YPF.”

Dunn further warned that inexperienced newcomers continue flooding into the market, undercutting competitors to win business before discovering the economics are far less glamorous than promised. According to her, many are seduced by polished presentations and headline-grabbing numbers without understanding the questions they should be asking in the first place. In other words, an industry built around assessing legal risk appears to have attracted plenty of people who are not particularly good at assessing risk.

“An industry built around assessing legal risk appears to have attracted plenty of people who are not particularly good at assessing risk.”

Taken together, Dunn’s remarks amount to a remarkable admission from within the industry itself: litigation funding may be failing at the very due diligence standards it claims to uphold. That concern is amplified by the fact that the sector remains largely self-regulated despite handling cases involving billions of dollars and major geopolitical consequences.

The litigation funder Dunn founded, Harbour Litigation, is itself the largest privately owned TPLF. Private funding may shield it from some of the intense shareholder pressure faced by publicly traded rivals chasing aggressive returns and headline-making awards at almost any cost.

Yet there is another interpretation of the supposedly helpless, misled litigation funder—one even more damaging to the industry’s image. Critics argue that TPLF firms are often not passive victims at all, but active architects of the very mega-litigation they now complain about. Far from simply financing cases, funders have been accused of shaping legal strategy, encouraging increasingly aggressive claims, and pushing lawsuits toward the kind of astronomical damages figures needed to justify the gamble.

“Critics argue that TPLF firms are often not passive victims at all, but active architects of the very mega-litigation they now complain about.”

Those concerns are hardly new. Allegations of funders exerting heavy influence over litigation have surfaced repeatedly, including in the very Sulu arbitration case that has come to symbolize so much of what critics see as broken within the TPLF industry. The U.S. Chamber of Commerce Institute for Legal Reform has previously raised alarms over litigation funding arrangements in cases such as Gbarabe v. Chevron Corp. According to the report, Therium Capital Management negotiated funding terms that gave it sweeping oversight of the legal process through a jointly approved “Project Plan.” Lawyers reportedly could not appoint experts or co-counsel without Therium’s approval, while company representatives were allegedly permitted to attend internal meetings and even mediations.

The report concluded that such arrangements handed funders “substantial control over key litigation decisions.” That makes the industry’s sudden complaints about being misled sound considerably less convincing.

So which story is the public supposed to believe? That litigation funders are naive investors constantly tricked by overenthusiastic lawyers and claimants? Or that they are sophisticated financial actors deeply embedded in steering litigation from behind the scenes whenever billions of dollars are on the table?

The Sulu arbitration raises exactly those questions. The claimants themselves are widely understood to be individuals of modest means, with little apparent capacity to independently coordinate a sprawling, globe-spanning legal offensive involving multiple jurisdictions and massive financial exposure. Sources familiar with the matter have even argued that the real driving forces behind the arbitration were the lawyers and Therium rather than the claimants themselves.

All of this leaves the industry facing an uncomfortable reality of its own making. If litigation funders helped create the culture of speculative, high-risk mega-claims now consuming the sector, they can hardly pose as innocent bystanders when those bets collapse. After years of aggressively commercializing legal disputes and chasing colossal payouts, litigation finance increasingly looks like an industry being devoured by the same recklessness it encouraged in the first place.

Ultimately, if others in the industry begin echoing Dunn’s warnings—playing the victim or otherwise, it may signal the beginning of a long-overdue reckoning for litigation finance. The sector once marketed itself as a mechanism for helping underfunded claimants pursue legitimate grievances. Increasingly, however, it looks less like a tool for justice and more like a speculative financial industry that wandered into courtrooms convinced it had discovered a foolproof way to mint billions—only to discover that reality, inconveniently, still exists.

REFERENCES

KnowSulu. (2025, December 10). D-Day for the Sulu Lawsuit: Malaysia Triumphs Over the Heirs’ $14.9 Billion Arbitration Award. https://www.know-sulu.ph

Hyde, J. (2026, May 15). Litigation funder: Law firms should “be honest about claims.” Law Society Gazette. https://www.lawgazette.co.uk

Reuters. (2025, December 10). French court annuls cash bid by late sultan’s heirs in Malaysia land dispute. Reuters. https://www.reuters.com

Therium. (n.d.). Therium Capital Advisors. Therium. https://www.therium.com

Therium. (2025, October 6). Therium Capital Advisors launched to provide litigation finance advisory services. Therium (News, Insights & Events).

https://www.therium.com

U.S. Chamber of Commerce Institute for Legal Reform. (2022, November). ILR Briefly: A new threat: The national security risk of third-party litigation funding. Retrieved from https://instituteforlegalreform.com