LexShares Case #217: My First Litigation Investment
640 days to break even — and why I consider that a win
The Numbers
| Invested | $10,000 |
| Returned | $10,000 |
| Net Profit | $0 |
| MOIC | 1.00x |
| IRR | 0% |
| Holding Period | 640 days |
The Case
A software company developed a web-based payment platform for transportation companies. A Fortune 500 trucking conglomerate signed a 5-year contract to use the platform as its sole invoice payment system, promising minimum transaction volumes.
What allegedly happened next:
- The trucking company repeatedly delayed transitioning customers to the platform
- Transaction volumes never reached promised minimums
- After gaining access to the software’s source code (through a modified escrow agreement), the trucking company built its own competing system
- The trucking company stopped using the plaintiff’s platform entirely before the contract expired
Claimed damages exceeded $9 million. The defendant was a subsidiary of a publicly-traded Fortune 500 company with $20+ billion in annual revenue.
Timeline
| Date | Event |
|---|---|
| Mar 7, 2017 | Funded $10,000 |
| Mar 21, 2017 | Capital disbursed to plaintiff |
| Oct 2017 | Discovery deadline extended |
| Mar 2018 | Trial date set for October 2018 |
| May 2018 | Summary judgment — granted in part, denied in part |
| Aug 2018 | Trial rescheduled |
| Sep 2018 | Defendant’s summary judgment motion denied |
| Nov 20, 2018 | Settled — expert witness compromised |
| Dec 7, 2018 | Received $10,000 |
What Went Wrong
The expert witness was compromised. In litigation, expert testimony often determines damages. Without credible expert evidence, the plaintiff couldn’t prove the value of their claims at trial. This dramatically weakened the case.
The plaintiff faced a binary choice:
- Option A: Go to trial without key expert testimony → high risk of total loss
- Option B: Settle for a reduced amount → guarantee some recovery
They chose Option B. The settlement was enough to repay LexShares’ funding with the plaintiff keeping the rest, but nowhere near the $9M+ originally claimed.
Return Breakdown
| Total Settlement | Undisclosed |
| LexShares’ Share | $406,768 |
| Plaintiff’s Share | Remainder |
| My Share of LexShares’ Recovery | |
|---|---|
| LexShares’ Share | $406,768 |
| Fund Expenses | ($6,748) |
| Net to Fund | $400,020 |
| My Share (2.5%) | $10,001 |
| Carried Interest (20%) | ($0.10) |
| My Net Return | $10,000 |
Expected: $9M+ damages claim against Fortune 500 company
Reality: Settlement large enough to repay LexShares (~$407K) with the plaintiff keeping the rest — but nowhere near the original claim
What I Learned
Expert witnesses are single points of failure. A case can have strong facts, a deep-pocket defendant, and experienced counsel — but if the expert is compromised, damages become unprovable. Due diligence on expert witnesses matters.
Getting principal back is a win. When a case goes sideways, the goal shifts from profit to capital preservation. I expected to lose everything. Breaking even after 640 days felt like a victory.
The funder aligned incentives correctly. LexShares could have pushed for trial (hoping for a big payout). Instead, they recommended settlement to protect investor capital. That built trust for future investments.
Small first bets are wise. I invested only $10,000 because I was new to the asset class. If this had been a $100K position, the 21-month cash drag with 0% return would have hurt much more.
This was my first LexShares investment. I signed up in February 2017, studied past offerings for 3 weeks, and chose a breach of contract case because it seemed straightforward. It wasn’t — but I got my money back, learned valuable lessons, and kept investing.
