When funding fails: protecting OneCoin victims in high-stakes group litigation

The OneCoin fraud was one of the largest Ponzi schemes and crypto scams in history. Several of the perpetrators of the OneCoin fraud have been arrested and incarcerated. However, the whereabouts of the founder of OneCoin, Dr Ruja Ignatova, the so-called ‘Cryptoqueen’ and one of the FBI’s Top 10 Most Wanted Fugitives, remain unknown.

In April 2024 a claim was initiated in the English High Court seeking compensation on behalf of 439 individual victims, resident all over the world. The claimants were represented by a steering committee, led by Jennifer McAdam, who has been outspoken about the devastating effect of the OneCoin fraud. The claimants successfully obtained a Worldwide Freezing Order over a range of assets held by the defendants (including Ruja Ignatova, who has not engaged in the proceedings). This success proved to be short-lived. The litigation funder terminated the litigation funding agreement. Without funding, the claimants’ solicitors then terminated their retainer and later came off the record. In a matter of months, the claimants were plunged into the perilous condition of having no funding, no lawyers, and crucially, no after-the-event insurance in extant High Court litigation, to protect them from adverse costs liability (i.e., liability for the Defendants’ costs).
Together with Patrick Green KC and Kathleen Donnelly KC of Henderson Chambers, Stephenson Harwood agreed to step in to support the steering committee navigate this situation on behalf of the claimants, and to assist them in avoiding the adverse costs exposure that they might otherwise have faced in the proceedings, in the full knowledge that the steering committee did not have the means to pay for our assistance.

At a time when there is public scrutiny about whether it is the lawyers and funders, rather than the claimants in group actions who truly benefit, we wanted to show that lawyers can and do step in for the right reasons. We also acknowledge the hard work and determination of the steering committee in helping to protect the claimants from any liability.

As a law firm with extensive experience in group action litigation in this jurisdiction, we are keenly aware of how vulnerable funded claimants can become when funding and representation fall away. These are issues we have considered carefully, including most recently in our submissions to the Civil Justice Council (CJC) and the Department for Business and Trade (DBT), in connection with their respective reviews into the use of third-party litigation funding and the collective actions regime. Our reflections on best practices in funded group action litigation have coalesced around three major themes.

Practical safeguards must be built into the arrangements between claimants and their funders and lawyers. Claimants must always have the benefit of independent legal advice on the terms of any funding arrangement put to them. If the claimants cannot afford to obtain independent advice themselves, this should be arranged and paid on their behalf by the litigation funder, as a condition of the claim being initiated. Claimants must be advised on the importance of after-the-event insurance to protect against adverse costs exposure, and the pitfalls of not having a robust after-the event insurance policy with a reputable insurer in place.
Risks must be clearly communicated to the claimant group from the outset. While the potential benefits of group action litigation are often used to encourage claimants to sign up to these claims, the potential risks, particularly those relating to potential liabilities, must be clearly disclosed in plain language in all advertising material. Claimants in group action litigation are often unsophisticated in matters of law and legal procedure. Information should be clear, comprehensive, and tailored to accommodate the particular circumstances of the claimant group.
Termination of a litigation funding agreement should be a last resort. Where funders and funded parties are in dispute as to either party’s right to terminate the funding agreement, the parties should engage in good faith efforts to resolve the dispute before resorting to termination. Funding agreements should include a dispute resolution procedure, for example a procedure which provides for the resolution of disputes by an independent King’s Counsel, which protects both the funder and the funded party from sudden changes to the funding arrangement which have serious consequences for the ongoing litigation.

The Stephenson Harwood team working on this matter included partners Genevieve Quierin and, Tim Knight, and associates Stephen Littleford and Phoebe Love.

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