Bankrupt 23andMe Cleared By Judge To Sell Americans’ DNA Data To Highest Bidder

Let’s start with this week’s chaotic events surrounding the bankrupt genetic testing startup, 23andMe Holding Co.: 

• Monday: 23andMe Files For Bankruptcy, CEO Resigns – Fate Of Americans’ DNA Data Now In Court-Supervised Sale

• Tuesday: US Official Alleges 23andMe Sold Americans’ DNA Data To Pharma Companies Owned By Foreign Adversaries

• Wednesday: 23andMe Customers Panic To Delete Genetic Data

Fast-forward to Thursday: Bloomberg reports the worst fear for 15 million 23andMe customers: US Bankruptcy Judge Brian C. Walsh has granted the defunct genetic testing startup permission to sell its massive genetic database, potentially ending up in the hands of private equity firms that will find new ways to monetize the sensitive data. 

Here’s more from the report:

Under the sale procedures, the company set quick deadlines for potential bidders, including May 7 when definitive offers are due, and a final hearing the following month.

But US Bankruptcy Judge Brian C. Walsh required the company to slow the overall pace by two weeks, in part to accommodate his schedule and in part to give creditors a chance to weigh in before the court makes a final decision on a buyer.

“My overall reaction to the timeline is that it’s pretty tight,” Walsh said at the company’s first bankruptcy hearing, held in St. Louis. At his request, the company agreed to push back the final court hearing for possible sale from June 2 to June 17.

Walsh’s ruling didn’t resolve concerns raised by the looming auction of the sensitive data or complaints from shareholders about the months 23andMe spent trying to find a buyer before filing for court protection earlier this week.

. . . 

Walsh at the hearing said speed in the sale process is partly justified because the company spent so much time trying to find a buyer before it filed bankruptcy. But the goal, he added, should be to “balance the desire to move quickly with the desire to avoid collateral damage.”

More color: 

Carole J. Ryczek, a lawyer with the US Trustee’s office, which acts as a public watchdog in bankruptcy court, told Walsh that a privacy ombudsman is necessary to oversee the sale of customers’ private genetic information.

The bankruptcy case “needs a neutral third party” involved in the sale process to protect customers, Ryczek said. Company lawyers and company investment bankers declined to comment on the value of the customer data.

Walsh declined to say whether he would support a consumer privacy ombudsman, or how he would respond to a demand by two investors that he appoint an official committee to represent shareholders. Those shareholders complained about how the company tried to sell itself before filing for court protection.

23andMe lawyer Grace Hotz argued that an ombudsman was unnecessary because of the extensive privacy policies. Under the US Bankruptcy Code, companies cannot sell personally identifiable information about a consumer unless the sale conforms to the firm’s privacy policies or until after an ombudsman is appointed.

23andMe’s shares in New York have been on a rollercoaster—from the bankruptcy news that sent them crashing below $1 at the start of the week to erupting as much as 158% earlier today after the judge granted the defunct startup permission to sell customer data…

The takeaway for consumers is to never hand over your biometric data to corporations, the government, or anyone else—those who did are now on a list that will be sold to the highest bidder.