It is a sad fact of life that fraud occurs on a daily basis across the United States and the world. This form of criminal behavior is particularly offensive due to the deceptive nature of the crime which often entails the perpetrator gaining the trust of the victim in order to defraud them. Fraud is especially prevalent in the financial industry and litigation financing companies are particularly susceptible to three types of fraud.
Incomplete or inaccurate disclosure: Often times a case which would otherwise be quite strong has one or a few weak points which weaken it substantially. When a plaintiff intentionally withholds critical information regarding a case from a litigation financing company, this is fraud.
Unfortunately this type of fraud is quite common in litigation finance and can be quite difficult to detect. This can range from plaintiffs not disclosing the true condition of things such as preexisting injuries, the condition of property prior to an accident, prior liens on property. It can also include exaggerating injuries, neglecting to mention injuries or damage to property occurring after the fact, or altering the course of events. This type of fraud far is too common and the damage inflicted by it can range from total ruination of a case to simply over valuing a case.
Incident fraud: It is an unfortunate fact of life that some people simply appear to find it easier to attempt to scam people than earn a living in a legitimate fashion. These are the type of people who perpetrate incident fraud by fabricating a tale of an incident wherein they are the aggrieved party and someone else is liable for injuries or damages.
This often includes fake medical records, fake accident reports, and other forged documentation which is brought to a legitimate (or otherwise) attorney. The fraudster then encourages the attorney to seek litigation funding. Upon receiving that funding absconds with the capital before the fraud is discovered. This type of fraud can be difficult to detect and often results in a total loss of the litigation financing companies investment.
Financial instrument fraud: Financial instrument fraud or check fraud predates the litigation financing industry and is a very common type of financial fraud in the United States and across the world. Litigation financiers are most susceptible to financial instrument fraud either when dispersing funds to a client or upon the successful settlement of a case,
In some instances when companies finance personal liability cases the plaintiff will request the funds be delivered to a family member or friend instead of themselves. The plaintiff then reports that the receiving party has absconded with the funds. Subsequent investigations later reveal collusion between the two parties to defraud the funder.
Alternatively the funder may receive returns from a plaintiff or their attorney in the form of a bad check which the funder deposits into their own account. When the bank processes that check in 1-5 business days it is revealed that the check was a forgery but by then the plaintiff has absconded with the capital.
Unfortunately fraud and deception are facts of life in the modern world. Almost every business will come into contact with people trying to defraud it at some point and being aware of what tricks are out there can make the difference between being a hard target and an easy mark.
