Even if we assume that it is legit, it is still a very risky business proposal.
once someone received a judgment saying that “x” company owes them $500,000
There are a lot of things which can happen now.
- The company might go bankrupt and unable to pay the settlement.
- It might not actually be the final judgment. The company might file an appeal. The actual final judgment might be completely different.
- The company might file a counter-claim suing "someone" back and get back part of the money (or even turn it around and get more from them)
- "Somoene" might not be credit-worthy. Maybe "Someone" has a couple outstanding debts themselves. The 580k they now have all get sucked up by other creditors. Or they just spend it. And then they won't be able to pay back the $100k in 3 months. Or "Someone" just disappears without a trace after they got their money.
If any of this happen, your grandfather will be out of his money. In order to mitigate that risk, your grandfather would have to do some research in each particular case. He would need to know a lot about businesses to estimate if the company is able to survive the lawsuit, he would have to know a lot about law to understand the court documents, what they actually say and if what they say is final and he would have to do some research on the debtor.
But if the case would really be risk-free, then the person could just as well get a loan from a bank for a much lower interest rate. Why don't they do that and instead pay your grandfather a huge 25% interest for a 3 month loan? That's a loan-shark level interest rate. Nobody would sign such a credit contract unless they are desperate (or don't intend to pay it back). Likely they already tried to go to a bank, the bank looked at the whole situation and then decided "Hell no, that's a totally crazy risk for us. Forget it!"