Burford Capital, the largest player in the litigation funding industry, is scrambling to respond to short-seller Muddy Waters’ scathing report from earlier this week. The report alleges “Enron-esque” accounting practices at Burford, including incomplete portrayals of the value of ongoing funded litigation that did not account for “potentially recovery-killing” developments in the cases concerned, Bloomberg Law reports.
Muddy Waters’ decision to target Burford has resulted in a 66% drop in the funder’s stock over the last two days. Following the news, Bentham IMF, the only other publicly-traded litigation funder, immediately sought to distance itself and its business practices from Burford. Speaking to Bloomberg, Bentham Chief Investment Officer Allison Chock insisted that her firm does not use the same accounting methods as Burford.
Chock chose not to comment on the possibility of further calls for transparency from civil justice groups like ILR, which has frequently criticized the opaque nature of the litigation finance industry and advocated for mandatory disclosure of litigation funding agreements.