AxiaFunder Review 2020 - Invest In Litigation Cases: Potential Returns Up To 20% Annually
What Is AxiaFunder?
AxiaFunder is a crowdfunding platform in the United Kingdom, specifically aimed at funding legal cases. Investing starts with GBP 500 per case and returns for investors average around 20% on a yearly basis, presuming a case is succesful. When a case either wins or settles, you are entitled to your financial share.
Litigation funding is a thing of its own in crowdfunding. It cannot be compared to other forms of crowdfunding, as the volume of investment possibilities offered as well as the risks involved differ significantly. At the time of writing, October 2020, 10 cases have been funded through the platform, 8 of which are still ongoing and 2 have been successfully resolved. The latter cases generated a 43% and 94% return on investment in 8 and 15 months respectively.
The possible downside to this form of investing is that when a case is lost, a part or all of the investors’ money is lost as well. Investors should be aware of this possibility. Therefore, this platform is definitely one for investors with a higher risk appetite. The minimum per case raised on the platform is £25,000 to £1 million at this stage.
Having its roots in the United Kingdom (2019), AxiaFunder has just started its operations. Therefore, the amount of cases and thus the investments offered are relatively low. However, AxiaFunder launched an equity campaign on the Seedrs platform in order to expand its business. Being amongst the first litigation platforms, the potential AxiaFunder has is significant, and as an investor it is definitely an option when investing.
Why Would Borrowers Use AxiaFunder?
Many investors would like to know why someone would seek crowdfunding in order to start a court case? While the answer to that question might be different for every borrower, we’ll name a few:
- Firstly, in the United Kingdom, the loser in a litigation case has to pay for the costs incurred by the other party. To mitigate this risk, an After The Event Insurance (ATE) is often purchased. The fees involved are considerable and add to the total cost of litigation. Therefore, funding litigation through a third party might be a suitable alternative.
- Secondly, the total amount of funds required to start litigation can rise significantly. If multiple investors co-finance the ligitation case, and the particular party to the case loses, the full amount is divided between multiple parties instead of only one.
- Lastly, for claimants AxiaFunder offers a fast and flexible funding solution whereas other possibilities might take more time and are more expensive. AxiaFunder will accept the case on its platform though only on the condition that it has a clear legal merit and sound economics.
Registering at AxiaFunder
Registering at AxiaFunder is rather easy, although it takes a few steps more than usual. Filling out the registration form, verifying both your e-mail and identity (as shown below) as well as a investor appropriateness test is the first part of the registration. Once your profile is checked and you have digitally signed your non disclosure agreement, you are ready to invest.
Support is widely available via the chat function or the extensive FAQ section should you encounter any difficulties. Keep in mind that in order to be eligible for investing at AxiaFunder you need to:
- be at least 18 years old;
- have a bank account in one of the EEA member states or in Switzerland (if you are not a EU or UK resident, other options are available but you have to contact AxiaFunder directly);
- and pass the KYC (know-your-customer) checks in order to comply with anti-money laundering procedures.
Unfortunately, residents from the US and Canada cannot invest with AxiaFunder.
You can sign up and fill out all the details using this form. Make sure you fully understand the terms and conditions, when ticking all the boxes.
The next step is to take an investor appropriateness test. A few questions will be asked with regard to your risk assessment and knowledge when it comes to investing. You can only take the test 2 times; it is recommended to explore AxiaFunders’ website thoroughly before filling out the form or contact them when necessary.
You can either invest as an individual or as an organization. This is followed by selecting what type of investor you are. The option is twofold: a High Net Worth Investor or a Self-Certified Sophisticated Investor. Once you tick one of these boxes a list of criteria pops up so you can decide for yourself which suits you the most.
Lastly, you have to upload your ID to verify your identify (either a passport or photographic driving licence) in order to comply with anti-money laundering regulations. This is also required to put in place a binding confidentiality agreement between AxiaFunder and the investor when starting to invest.
Once you have provided AxiaFunder with your ID, your profile will be checked which takes up to 30 minutes; you’ll be notified once this is completed. Depending on where you reside, sometimes proof of residence is also required, such as a utility bill. You’ll notified by email if this is the case.
When your profile has been checked successfully, you need to digitally sign a non disclosure agreement. This is required because the information related to a case is confidential and is usually sensitive for the parties involved in the cases funded at the platform. You only have to sign it once. Lastly, you have to deposit funds to the AxiaFunder platform which can only be done via a bank transfer.
Investment Opportunities With AxiaFunder
Now that you’ve gotten through the registration procedure, information on the investment opportunities are fully available. Cases can for example involve shareholder disputes, cases related to insolvency, a breach of contract or professional negligence. We’ll give you a few brief examples to illustrate the cases funded through AxiaFunder and give you an idea of what you might find on the platform:
A company director allegedly misappropriated a high-value property development for his own gain and to the detriment of the company. Analysis by lawyers led to “overwhelming” evidence of breach of fiduciary duties and joint enterprice conspiracy. The value of the claim is GBP 19 million.
A firm of solicitors and a planning consultant face a claim relating to the installation of several wind turbines. The solicitors failed to take into account the time frame for applying for a permit whereas the planning consultant made an application which did not meet the basic requirements to even be considered by the Planning Authorities.
Unfair Minority Shareholder Prejudice
In this particular case the minority shareholder has the view that she has been unfairly prejudiced and should be repaid a fair value of her shares. The majority shareholder and director of a company has diverted economic value from a minority shareholder who was instrumental in developing the business.
Other Important Characteristics When Investing With AxiaFunder
- Once a case is funded, AxiaFunder will monitor its progress closely. However, AxiaFunder is not in any way involved in the case, how this case will pursued or litigated. This is up to the claimant and his team of legal experts.
- AxiaFunder doesn’t have a secondary market yet, so once you have invested your money is locked in. Although this is not a guarantee or something that should be relied on, you can sell your investment to another investor. You do have to find this investor yourself, since AxiaFunder is not facilitating these kind of activities at the moment.
- A case cannot overfund, so when you want to invest make sure you do so in a timely manner especially when you reside outside the United Kingdom. Cases tend to get funded quickly, and when you as an investor want to be sure to participate in case, it is recommendended to deposit funds before the case goes live.
Team At AxiaFunder
AxiaFunder is led by an experienced team of professionals with a solid track record in litigation and finance, which is a comforting thought when investing.
- Its founder Cormac Leech has over 20 years of experience in financial services (private equity, derivatives, alternative financing). Amongst others, he founded and directed Liberum Alternative Finance;
- Sophie Liu, the COO and co-founder of AxiaFunder, was previously a co-founder and COO of Xanadu, a Chinese B2C internet startup;
- Rabin Tambyraja, co-founder of AxiaFunder, has over 20 years of experience working in finance in a range of positions from investment banking and project finance with for example Credit Suisse and JP Morgan;
- Michael Lent, Chief Investment Officer and in this role head of case assessment of AxiaFunder. He is a highly experienced lawyer / partner with over 8 years of commercial litigation case assessment experience and over 25 years of commercial litigation experience.
How Does AxiaFunder Work?
The course of action when investing with AxiaFunder basically consists of three steps:
1. The vetting of the case.
A claimant or solicitor will make its way to the platform. AxiaFunder will perform enhanced due diligence on the case at hand in order to determine whether it has a good chance of being successful. The team will also make sure that the claimant has a proper legal team and that the defendant in this particular case is capable of paying the damages when the case is successful. In order to makes its way to the marketplace cases have to meet a few criteria in order to get listed:
- the case is already screened by lawyers;
- the funding amount is between GBP 25.000 and GBP 1 million;
- the cases at hand have secured insurance. (An After The Event (ATE) insurance is designed to cover an opponent’s legal costs if the case is unsuccessful, in order to protect both the claimant and investors);
- the dispute is most likely to be resolved in 36 months;
- the damages amount to at least 5 times the costs.
Generally speaking, only 1 out of 20 cases offered to AxiaFunder actually make it to the funding stages of the platform.
2. When the case is accepted it will be offered on the marketplace.
Because AxiaFunder is still a pretty young platform, there is a possibility a case won’t be fully funded. To avoid a no fund, AxiaFunder entered into an agreement with a Partner company. Before the case is placed on the AxiaFunder platform, this company will review the case and decide whether it will invest in it, and if so how much, when it doesn’t get fully funded by the crowd. This provides more certainty for claimants that funds will be available to start their case.
The case is firstly being offered to AxiaFunder’s investors, and when a case is not fully funded, the deficit is funded by the Partner company. The only condition is that the Partner behorehand agreed upon a certain amount of their funds being invested: when the deficit is larger than the amount they committed to in review phase, the offer will be cancelled. Otherwise, litigation proceedings can start.
3. Structure of the investment
Your investment will be structured either as a bond or as equity for which the return will depend on the successful outcome of the case. AxiaFunder uses a Special Purpose Verhicle (SPV), which will be used only once for this particular case and where your share is held. When the case is settled, the SPV will wind down and the capital (when available) will be returned to the share holders.
Once your investment is made and the case is taken, the only thing remains is waiting for the outcome. This can take up to 36 months.
Risks When Investing: Is AxiaFunder Safe?
With investing comes risk and AxiaFunder is no exception to that rule. We name the most important risks involved when using this platform:
- Please note that returns are not in any way guaranteed;
- As noted earlier, it is important to understand that you can lose all your money invested when a case is not successful;
- Additionally, there is a chance, although small, that you lose more money than you actually invested. All claimants participating are required to obtain an ATE (After The Event) insurance. Summarized, an insurance company may refuse to pay. In the unlikely event this does happen, you could be liable up to twice the amount invested.
- AxiaFunder as a platform might default. In this unlikely situation, your investments are not compensated by the Financial Services Compensation Scheme (FSCS). However, your investment will be put into an SPV (Special Purpose Vehicle) to fund the case, so an investor is eligible to ownership of the litigation case in the event of a downturn.
All the risks mentioned above are taken into consideration when investing. If you are not willing to take the risk to lose a part or all your money, it is better to explore other options.
Frequently Asked Questions
Investing with AxiaFunder is open for citizens from all over the world, with the exception of the US and Canada.
AxiaFunder is a trading name of Champerty Limited (FRN 811606), an appointed representative of Share In Ltd (FRN 603332), which is authorised and regulated by the Financial Conduct Authority.
No, your investments are not covered by the Financial Services Compensation Scheme, so your capital is at risk when investing.
Two types of fees can be distinguished: a fee upfront (an equivalent of 7-10% of the total sum invested) and 20% of the net return when a case is successful.
AxiaFunder doesn't have a secondary market where you can sell your bond or equity investment. You can only do so if there is another investor willing to buy your investment. You should be aware that this is in no way a guarantee.
Where possible, AxiaFunder will keep their lists of investors private. Only when an investment is structured as equity of a Special Purpose Vehicle (SPV) AxiaFunder is required to submit investors' names and the number of shares held to the company through the SPV's annual confirmation statement. The name of the SPV won't be publicly linked to the case.
Final Remarks On AxiaFunder
AxiaFunder has a lot of potential, although it should be noted that it is a fairly young company with a limited track record. Additionally, this type of investing comes with high risk and high reward and is definitely for the advanced investor where a certain degree of knowledge is required as well as a higher risk appetite. Moreover, every case and investment should be judged on its merits. However, the platform is solid and it’s led by professionals with solid track records, therefore we rate them 4.2/5. Moreover, it still has plenty of growth potential:
- The number of cases to invest in is limited, which might not sound encouraging to some investors, but we rather see a select amount of high quality cases once in a while rather then cases with lower chances of success;
- The annual interest rates of 20-30% are very competitive and should earn investors some serious ROI. Again, It should be noted though that money can be lost as well;
- Customer service is extensive either via chat or mail and on particular cases questions can be asked via Zoom.
Summarizing, AxiaFunder is a solid platform led by professionals. Also, the cases offered by AxiaFunder are not affected by the economic climate, which is definitely a plus. If you want to diversify your investment portfolio, AxiaFunder is absolutely a platform to consider.
You can sign up via the link below by visiting AxiaFunder’s website.
- Summary & Overall Rating
Summary & Overall Rating
You’ll find a brief summary of AxiaFunders’ pros and cons.
- Very attractive return on investment when a case is settled or results in a win, up to 30% per annum
- Investment not affected by economic dynamics
- Expert team, which is well established and equipped with expertise required
- When a case is lost, a significant amount or in some cases the full amount invested is lost too
- Expert team, but fairly little cases and we need to see how the company further develops
- Investors from the US and Canada can’t use AxiaFunder