A New York attorney is being sued for allegedly scamming a Florida investor out of $2.5 million through what’s described as a “Ponzi scheme” disguised as a litigation finance deal. Law360 had the story:

Investor Sylvia Benito says she gave attorney Ed Lake and The Lake Law Firm millions to fund legal work tied to CARES Act and Employee Retention Tax Credit claims.

“Rather than honoring their agreement, Ed Lake used the funds for his own benefit, later recharacterizing her investment as a ‘loan’ to himself and appropriating for his own gain the opportunity that belonged to her,” Benito said in her complaint.

“In addition to a personal investment she made in April 2022, Benito said she and her attorney, who is not a party to the suit, had also created a joint venture in late 2020, raising millions to fund various mass tort actions taken up by Lake, according to the complaint. Those included talc litigation and claims related to Roundup and against 3M, among others. Another investor added funds, the suit states.”

Her lawsuit seeks $2.55 million in damages, a trust over $8.55 million in assets, and repayment of profits. Her lawyer, William A. Brewer III, said, “Our client seeks to hold a lawyer accountable for betraying the trust of investors and misusing their money under the guise of legal expertise.”

These allegations illustrate the potential for litigation funding to be misused, transforming lawsuits into profit-driven schemes rather than serving justice. When attorneys and funders regard claims as financial commodities, consumers lose their agency, settlements diminish, and confidence in the legal system deteriorates. 

It is imperative to implement more robust oversight and transparency within the growing $15.2 billion litigation finance industry. Regulatory bodies, legislators, and bar associations must take action to guarantee that investments aimed at justice do not devolve into investments in deceit. 

Justice should not be commodified, and consumers must not bear the cost.