23andMe Scores Approval of Data Breach Deal in Bankruptcy Court

23andMe’s bankruptcy judge preliminarily approved a settlement with arbitration claimants as part of a broader effort to provide up to $62 million to resolve thousands of data breach claims.

Judge Brian C. Walsh of the US Bankruptcy Court for the Eastern District of Missouri also said during a Wednesday hearing that he expects to rule on 23andMe’s proposed wind-down plan soon, but directed the company and a landlord asserting damage claims to submit briefing on the landlord’s objections first. The brief are due Monday.

23andMe, now Chrome Holding Co., filed for Chapter 11 bankruptcy in March. The company sought to sell its assets after demand declined and a 2023 data breach exposed data of nearly 7 million people, triggering dozens of lawsuits in the US and abroad.

The wind-down plan appoints a plan administrator to oversee liquidation and distributions in addition to the settlements with data breach victims. The plan contains exculpation and third-party releases that shield the company, officers, bankruptcy lenders, committees, and other parties in the case from liability.

The plan also includes a $10 million sale of the telehealth company Lemonaid to venture capital firm Bambumeta Ventures LLC, which will be consummated when the plan goes into effect. The DNA testing firm already sold most of its assets for $300 million in the summer to co-founder Anne Wojcicki and a related nonprofit, despite privacy concerns from states.

Over 30 states and Washington, DC, initially opposed provisions related to the Lemonaid sale transaction, arguing that 23andMe can’t use protections under section 363—a mechanism used for “free and clear” asset sales in bankruptcy—for its planned sale.

After negotiations, 23andMe agreed to amend the plan and drop the 363 reference, though the sale remains “free and clear.”

The states further objected to the plan’s third-party releases. A committee representing unsecured creditors opposed releases for Wojcicki and related entities, as well as former directors and officers.

The Department of Justice’s bankruptcy monitor, which initially challenged the releases as well, said during the hearing that it reached an agreement on language over the releasing parties.

A committee of equity security holders, which supports the plan, said objections to the releases should be overruled. It warned that if the protections are invalidated, the plan administration trust could face costly discovery disputes over “meritless claims.”

During Wednesday’s hearing, 23andMe attorney Christopher Hopkins of Paul, Weiss, Rifkind, Wharton & Garrison LLP said the company is in the late stages of negotiating a settlement with its cyber-insurance providers and will seek an expedited hearing for court approval by early December.

He added that the company is also finalizing negotiations with the unsecured creditors and equity committees and the plan administrator on the details of the trust agreement.

Data Breach Claims

The revised $9 million settlement that Walsh approved Wednesday covers about 32,000 claims from customers who opted out of a US cyber breach class and filed arbitration demands.

He found in September that a $6.5 million deal reached before the bankruptcy was valid, despite objections from claimants who argued it couldn’t be enforced because the company had received additional funds after the asset sale. After the ruling, the parties negotiated a new resolution.

He previously approved two other breach-related agreements: a fund of between $30 million and $50 million for the US class and another with $3.25 million for the Canadian class. Final approval hearings are set for early next year.

The company also recently won approval to remove about 157,000 potentially fraudulent claims related to the data breach. The claims were flagged because they used email addresses that didn’t match customer records, included suspicious descriptions, or originated from suspicious domains.

23andMe is also represented by Carmody MacDonald PC.

The equity committee is represented by Brown Rudnick LLP and Desai Law Firm LLC. The unsecured creditors committee is represented by Stinson LLP and Kelley Drye & Warren LLP.

A group of states is represented by the National Association of Attorneys General, while others are represented by their own respective attorneys general.

The case is Chrome Holding Co., Bankr. E.D. Mo., No. 25-40976, hearing 11/19/25.