Is It Ethical to Make Money by Investing in Lawsuits?

It was an idea that came about in 2016 when investors wanted new options for better returns. Mighty Group Inc. offered a unique proposition: Investing in a lawsuit could earn up to 30% interest on assets that have zero correlation to anything else in the portfolio.

Mighty Group Inc. lends money to plaintiffs who are in the middle of a personal injury lawsuit. Many of these individuals are unable to work or generate income while in the middle of litigation. Their bills pile up quickly, evictions can happen, and the insurance company keeps stalling for months or years before paying up.

By supplying a loan that gets paid when an award or settlement gets reached, you have an early-stage chance to invest in a different lending opportunity. Each case gets carefully examined to ensure the odds are in the investor’s favor.

Is this an ethical investing decision to make?

Insurance Companies Paid $140 Billion for Lawsuits in 2014

Over half of the injury lawsuits in the United States involve automobile accidents each year. With a figure approaching $200 billion in some years, the dream of investing in lending opportunities to plaintiffs isn’t far-fetched.

You’re not financing the lawsuit. You’re betting that the plaintiff wins the case, pays off the loan with what they receive, and has enough left to live a comfortable life.

Peer-to-peer lending websites are already taking advantage of this opportunity. Prosper and Lending Club make small, unsecured personal loans to individuals in ways that were classified as high-risk opportunities not that long ago.

You’re helping people to pay rent and buy food. Then you make money through the interest that you earn.

The ethics of that decision depend on the investor. The plaintiffs need these items anyway. If you charge a lower interest rate than a credit card provider, then you could be saving them some cash.

When your return is a percentage of the award or settlement, then that might be a different story.

Higher interest rates are part of the lending process for lawsuits in many markets. Mighty Group Inc. has had 100 transactions per month since its official launch. 

Most of their rates are above 30% because of the risk involved. As long as the deal gets structured as a loan, then this investment option gets around the rules that are in place to prevent claims being sold to others.