In recent weeks, the business pages have been full of stories concerning the genomic testing company 23andMe, in particular with respect to privacy issues and the company’s bankruptcy. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, considers potential D&O liability issues that recent developments involving the company could raise. I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
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On June 11, 2025, the U.S. Senate Committee on the Judiciary (Judiciary Committee) held a hearing on the “privacy and national security implications” of 23andMe, Inc. (23andMe) filing for bankruptcy. 23andMe filed for Chapter 11 bankruptcy on March 23, 2025, and, on June 13, 2025, the Bankruptcy Court approved the company’s sale at auction to TTAM Research Institute (TTAM), a nonprofit led by 23andMe’s former CEO and cofounder, Anne Wojcicki. The $305 million purchase would include nearly all of 23andMe’s assets, including its Personal Genome Service (PGS) and Research Services business lines. A Court hearing for transaction approval is currently scheduled for June 17, 2025. The TTAM acquisition is expected to close shortly thereafter.
While 23andMe’s business model is unique in terms of collecting, testing, and providing genetic data for consumers, the D&O underwriting risks stemming from its bankruptcy filing and regulatory scrutiny may not be in the current economic and political landscape. As readers of the D&O Diary are aware, a securities claim may follow a bankruptcy filing. While 23andMe shareholders have not yet filed such a claim, emerging facts could potentially increase that risk.
In addition, state and congressional concern over 23andMe’s sale may lead to increased subpoena and hearing activity and, as a result, increased D&O insurance impairment. As the 23andMe saga plays out, there may be lessons learned along the way for D&O underwriters. The following discusses the origin and rise of 23andMe, its bankruptcy proceeding, subsequent regulatory petitions to intervene, and congressional inquiries that may identify potential takeaways.
First, a brief history that, in part, can explain the heightened scrutiny around 23andMe’s proposed sale. Founded in 2006, 23andMe pioneered personal genomics by offering saliva-based DNA testing kits that enabled consumers to explore ancestry and health insights. The company grew to over 15 million customers who submitted saliva samples for testing in independent laboratories. The FDA approved various 23andMe market tests that provided individuals with health information, including whether they carried genetic mutations or alleles that put them at risk for getting or having certain diseases.
23andMe went public in 2021 via a SPAC merger and reached a peak valuation of around $6 billion. By 2024, its valuation had fallen to 2% of that peak. In March 2025, 23andMe filed for Chapter 11 protection, listing $214 million of debt, and Ms. Wojcicki stepped down. 23andMe’s bankruptcy was attributed to several factors, including recurring revenue from health or subscription services never materializing, a costly drug‑development initiative, a telehealth acquisition that was scrapped in late 2024, and an October 2023 data breach, when hackers stole personal information about 7 million 23andMe customers. With that backdrop, the following discusses the various implications to 23andMe and similarly situated public company D&O programs.
On its own, a bankruptcy filing may trigger coverage under its D&O insurance program. Side A coverage in a D&O insurance policy protects individual directors and officers when the company cannot indemnify them. Side B provides reimbursement to the organization for indemnifying directors and officers, while Side C covers the organization itself for securities claims (in the case of public companies). Sides B and C of a D&O insurance policy are often considered assets of the bankruptcy estate because they provide coverage to the company itself.
As such, bankruptcy courts may seek to preserve or control these proceeds for the benefit of creditors. In the case of 23andMe, selling its assets out of bankruptcy to TTAM, a nonprofit organization run by its former CEO, may raise creditor and shareholder scrutiny. Ms. Wojcicki’s contemporaneous exit with the company’s bankruptcy filing and reemergence as the winner at auction may provide ammunition in a post-bankruptcy securities case. Particularly, what did Ms. Wojcicki know then, and what does she know now that makes TTAM a better steward of 23andMe’s business?
Common grounds for Securities Class Actions Post-Bankruptcy include allegations of Securities Act Sections 10(b) and 10(b)(5) and Section 11 or 12(a)(2) violations, which prohibit fraud in connection with the purchase or sale of securities and impose liability for misstatements in SEC registration statements and prospectuses. Ms. Wojcicki’s previous attempt to take 23andMe private in September 2024, coupled with her sale of shares, was met with shareholder inquiries.
Two separate shareholder firms previously launched formal investigations into whether Ms. Wojcicki and the 23andMe board breached their fiduciary duties in connection with the attempted take-private bid, which ultimately failed to provide fair value to shares, and the subsequent resignation of all independent directors. Future sale to Ms. Wojcicki may raise more investor questions, and potential claims for securities violations arising out of leadership and board actions ahead of 23andMe’s Chapter 11 filing, and whether TTAM, with Ms. Wojcicki at the helm, was unconflicted and capable of “advanc[ing] the Company’s founding vision of helping people access, understand and gain health benefits through greater understanding of the human genome.”
Another D&O underwriting exposure may be correlated with the scrutiny of the approved sale to TTAM by state and federal regulators. California’s AG and 27 state attorneys general, plus DC, filed a petition on June 9, 2025, in the 23andMe bankruptcy court to stop any sale of customer genetic data without explicit user consent (Regulator Petition). The petition cites customer privacy concerns applicable to state constituents who have submitted genetic data to 23andMe. In addition, FTC Chair Andrew Ferguson sent a letter to the trustee of the 23andMe bankruptcy proceeding stating that any sale must honor privacy promises outlined in 23andMe’s policies, or it risks violating the FTC Act.
Whether the bankruptcy court will consider the Regulator Petition or the FTC letter remains to be seen. However, 23andMe’s stockpile of customer genetic data makes it an attractive acquisition and an attractive target for Congressional committees seeking to protect constituents. In addition to the Senate Judiciary hearing, various House Oversight committees have formally requested information and testimony about how genetic data will be protected in a sale and whether prospective buyers will adhere to privacy controls. If a director or officer is subpoenaed or becomes a target of a congressional investigation and must retain counsel, D&O insurance may cover legal fees..
All of this to say that, while 23andMe may have had a successful, novel business model in providing customers with individually tailored health data, the D&O risks stemming from its bankruptcy filing and contemporaneous regulatory scrutiny are not unlike other public companies. However, a successor-former CEO, a prior data breach, and access to millions of customers’ genetic information may make 23andMe and its successor a more attractive target of litigation and congressional inquiries.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.