Republic Lists First Initial Litigation Offering for Apothio Case

William Blackstone Common Law Washington DC Legal Lawyer Justice

Republic, a top online investment platform, has listed its first litigation funding offer or “Initial Litigation Offering” (ILO) a tokenized security for a court case initiated by Apothio.

Litigation funding is a method to crowdfund a legal case that is expected to be brought to trial or settled by the parties involved. By providing the capital needed to pursue the case, investors can benefit by receiving a portion of the settlement if the case is victorious.

Republic is actually tokenizing the security and leveraging blockchain to manage the offering. According to the offering page, with a minimum investment of $100 an investor may receive zero or up to 3.5x back in returns. The security offering is under the Reg CF exemption and is open to both accredited and non-accredited investors.

So what’s the case?

Apothio, LLC v. Kern County et al.

Apothio, LLC is an Indiana company that researches and commercializes hemp. According to the offering page, Apothio’s focus is on proprietary genetics, developing proprietary formulations to specific clinical outcomes, and industrial-scale hemp production.

On October 25, 2019,  the Kern County Sheriff’s Office (“KSCO”) and California’s Department of Fish and Wildlife apparently destroyed roughly 450 acres of Apothio’s plants upsetting the company. Apothio estimates the destroyed plants were worth between $500 million and $1 billion at the time of the event. Apothio claims that the destruction was done without any prior notice and government officials in “full tactical gear” ordered the contract farmers to “bulldoze and bury 500 acres” of legal hemp crops. Apothio claims the destruction of the private property is “virtually unprecedented in US history.”

Kern County, et al., claims the hemp plants tested above the legal limit and thus was classified as marijuana. On April 10, 2020, Apothio sued Kern County along with others in an attempt to recoup the loss.

This will all be sorted out by the courts, of course. If you are interested, you may read the entire court filing here.

As of today, the offering has raised $196,000 backed by 106 investors. The target amount for the raise is $250,000 with a max raise set for $5 million. You may review the Form C document here. The returns structure is shared below:

  • 200% (2x) of the Purchase Price if a recovery occurs between 0 and 12 months from the Closing Date. For example, if the Purchase Price is $100 (i.e. 100 ILO Tokens), the Buyer shall be entitled to receive $200 (or $200 in USD, or digital equivalent, such as USDC).
  • 250% (2.5x) of the Purchase Price if a recovery occurs between 12 and 24 months from the Closing Date. For example, if the Purchase Price is $100 (i.e. 100 ILO Tokens), the Buyer shall be entitled to receive $250 (or $250 in USD, or digital equivalent, such as USDC).
  • 300% (3x) of the Purchase Price if a recovery occurs between 24 and 36 months from the Closing Date. For example, if the Purchase Price is $100 (i.e. 100 ILO Tokens), the Buyer shall be entitled to receive $300 (or $300 in USD, or digital equivalent, such as USDC).
  • 350% (3.5x) of the Purchase Price if a recovery occurs at any point after 36 months from the Closing Date. For example, if the Purchase Price is $100 (i.e. 100 ILO Tokens), the Buyer shall be entitled to receive $350 (or $350 in USD, or digital equivalent, such as USDC).

The Apothio ILO was first revealed in December 2020 but only listed recently on Republic. At the time of the announcement, Republic said the unique venture was in partnership with Avalanche and Roche Cyrulnik Freedman, LLP. Republic also indicated that at some point in the future these securities may become tradable on Ryval a secondary marketplace for litigation-based securities. Ryval claims to be “the stock market of litigation financing.”

While Republic is not alone in seeking to create a market and marketplace for litigation financing it will be interesting to watch how this sector of crowdfunding evolves and if this offering becomes tradable on Ryval.

 

 


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