23andMe's Bankruptcy Sparks Privacy Concerns Over Genetic Database Of 15 Million Customers

On Sunday, human genetics and biotechnology company 23andMe Holding Co ME voluntarily filed for Chapter 11 bankruptcy to enable a sale process to maximize its business value.

The move follows the recent rejection of a non-binding acquisition offer from CEO Anne Wojcicki and her affiliates. In November, 23andMe had announced a business restructuring to streamline operations and reduce costs.

Customers who have shared their DNA with the company now risk having their genetic data sold to the highest bidder due to its bankruptcy, raising concerns about privacy and legal protections.

The Bloomberg report says 23andMe has proposed a May 14 auction to sell its assets. Founded in 2006, 23andMe said in court papers that the data represents "one of the world's largest crowdsourced platforms for genetic research."

In a note to customers, 23andMe said that the "Chapter 11 filing does not change how we store, manage, or protect customer data." The company boasts a database of 15 million customers globally.

The company added that customers will have full access to their accounts, genetic reports, and any stored data during the process.

On Tuesday, New York Attorney General Letitia James issued a consumer alert to customers of 23andMe, providing instructions on how to delete their personal data and destroy any samples of genetic material held by the company.

Bloomberg report, citing a court filing, outlined that bidders must state in writing that they comply with the company's privacy practices, "which do not restrict the transfer of personally identifiable information of the debtors' customers in connection with a bankruptcy, merger, acquisition, reorganization, or sale of assets."

"We are watching this bankruptcy filing closely and expect to be actively engaged to ensure sensitive records are protected and 23andMe is held accountable," Connecticut Attorney General William Tong said on Monday.

In 2023, 23andMe learned that a threat actor accessed several individual 23andMe.com accounts through credential stuffing. The data breach occurred in April 2023, and the company learned about the incident in October 2023.

The company settled the lawsuits with $30 million related to the breach. A law firm representing around 5,000 customers of genetic testing company 23andMe has raised objections to a proposed $30 million class action settlement, arguing the settlement is intentionally designed to undermine claimants' rights.

Price Action: ME stock is down 11.7% at $0.64 at the last check Tuesday.

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