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A major financial story is unfolding in the English courts that perfectly highlights the problems with the worldwide litigation funding sector and why Congress needs to step in to stop this new model of litigation from becoming entrenched in the American legal system.
According to reports, Gramercy Funds Management, a US-based hedge fund, has committed over $767 million to fund UK-based law firm Pogust Goodhead — around 10% of the asset manager's total assets under management. And right now, that bet is going very wrong indeed.
Pogust Goodhead was funded to bring a massive class action lawsuit on behalf of over 400,000 people affected by the 2015 Fundão dam collapse in Brazil against BHP, the world's largest mining company. It was always intended to be a landmark case and a huge windfall. But in a shocking development, the client committee for those 400,000 individuals voted to sack the law firm entirely.
It makes for rather awkward reading when the clients of a law firm decide to ditch their lawyers.
This raises an obvious and disturbing question: what interests was Pogust Goodhead actually serving?
When a huge sum of money is at risk in litigation financed by a hedge fund, the interests of the funder will inevitably conflict with the interests of the claimants. Gramercy needed a massive settlement. The 400,000 claimants needed competent, unconflicted legal representation. Those two needs are not always met by the same people.
According to reports, Gramercy's total exposure — once interest is factored in — could exceed $1.7 billion. Gramercy reportedly used funding vehicles in the Cayman Islands to keep the scope of its investment hidden from public view. Whether that money belongs to Gramercy itself or to its investors remains, according to reports, undisclosed.
This opacity is not accidental. It is the business model.
Now a new firm — Bailey Glasser International — has apparently emerged to take over representation of the claimants. According to company documents, BGI is owned by Jeremy Evans, a former Pogust Goodhead partner. Funding reportedly arrived on the very same day Pogust Goodhead was fired — August 29th — from a Guernsey-registered company called Samba Limited, previously known as Ruhr Diesel Limited, which changed its name as recently as September 2nd. Its four directors are all employees of a corporate administration provider.
I've done years of work myself on the asset management side in Guernsey. It's where the British and other elites go to get rid of transparency. Nominee directors are the norm. Scores of company tombstones are listed besides the elevators inside the buildings.
None of this is necessarily illegal. But all of it is designed to ensure that nobody knows who is really pulling the strings.
A recent Washington Examiner piece exposed how third-party litigation funding has become a vehicle for unknown parties — foreign sovereign wealth funds, activist hedge funds, entities with geopolitical agendas — to bankroll lawsuits in American and British courts while remaining completely hidden from public view.
President Trump has spent his career exposing the ways powerful institutions are weaponized against ordinary people. This is one of the most under-the-radar examples. When a hedge fund bets $767 million on a class action, 400,000 real human beings with real claims become, functionally, a commodity. Their pain funds a financial instrument. Their resolution becomes secondary to the return on investment.
The British courts will soon decide who represents those claimants. That decision may wipe out Gramercy's investment entirely. But the larger question — who funds litigation, with whose money, toward whose ends — will not be resolved in a London courtroom.
That question needs to be resolved by Congress. Third-party litigation funding must be disclosed. The court, opposing parties, and the public deserve to know who is really paying. The alternative is a legal system where the wealthiest and most secretive actors in the world weaponize courts without ever putting their names on a single filing.
The Gramercy-Pogust Goodhead story is a cautionary tale. Will Washington be paying attention?
