California’s lawsuit loansharks: When hedge funds profit from trauma

California rightly prides itself on standing up for victims of abuse and holding wrongdoers accountable. But a troubling trend threatens to undermine those goals, turning deeply personal trauma into a tradeable commodity and profit opportunity for hedge funds and Wall Street investors.

A recent investigation from the Los Angeles Times revealed how third-party litigation financiers are embedded in major sex-abuse lawsuits across California. “Records reviewed by the Times show law firms that...