The total amount includes $8 million in punitive damages
A three-week civil trial at the Bergen County Superior Court of New Jersey recently ended with a jury awarding The Law Funder, LLC $33.5 million dollars. The amount is payable by, among others, defendant Matthew Sheldon, who in 2013 pleaded guilty in the United States District Court for the District of New Jersey to the same unlawful conduct.
“This verdict is a victory for my clients,” said Sean Callagy of Callagy Law, who represented The Law Funder in the case. “While this does not represent a complete recovery for them, we will continue to pursue the payment due for the rest of Sheldon’s life so that he may repay some of what my clients have lost.”
Sheldon is currently incarcerated and is serving a sentence of 30 months in prison after having pled guilty to conspiracy to commit wire fraud in 2013. He admitted to engaging in a kickback scheme that resulted in him and a number of other defendants being paid improper referral fees by the litigation funding company The Law Funder, LLC.
Sheldon had served as an attorney and chief underwriter for The Law Funder of New York, a company that he co-founded in 2004 with three other individuals.
His fraudulent activity began in 2005, when Sheldon started to work with a New Jersey broker to garner referral fees, which the two split. The fees collected amounted to at least $870,000 in profit for Sheldon.
His indiscretions were uncovered in 2009 after The Law Funder had dismissed Sheldon. An investigation by Callagy Law uncovered other fraud that was also included in the civil complaint.
The case alleged wrongdoing beyond the criminal charges, including claims that Sheldon purposefully overvalued some cases and approved funding for bad cases for his own personal benefit.
Sheldon was also accused of transferring $750,000 for fictitious cases to Jessica Escobar in Houston, who posed as both attorney and paralegal and was alleged to have had an intimate relationship with Sheldon.
The suit named 20 defendants, including Gregory Krasovsky, an attorney who previously represented The Law Funder and was aware of Sheldon’s fraud but did not alert the company, according to the complaint.
The verdict was released on June 24, 2014, with the jury awarding a total of $24.5 million in compensatory damages – $22.9 million against Sheldon, $2.2 million against Krasovsky, and $375,000 against another defendant. On June 25, 2014, the jury awarded an additional $8 million in punitive damages against Sheldon for a total of $33.5 million against him and the remaining defendants.