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Company agreed to demand by several state attorneys'

general

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23andme is still looking for a buyer for its business

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Attorneys raised concerns about $30 mln data breach

settlement

By Dietrich Knauth

NEW YORK, April 29 (Reuters) - Genetic testing company

23andMe agreed on Tuesday to allow a court-appointed overseer to

take charge of ensuring customers' genetic data remains

protected during the company's bankruptcy, settling a dispute

with several U.S. states.

Those states had argued the company was not taking data

security seriously enough.

U.S. Bankruptcy Judge Brian Walsh approved the agreement at

a court hearing in St. Louis, Missouri, ordering the appointment

of a consumer protection ombudsman who will be empowered to

review 23andMe's handling of customers' genetic information and

its security policies.

The ombudsman will also review any sale of 23andMe's

business or data during the company's bankruptcy, and report to

the court about how any sale would impact customers' data.

23andMe had initially proposed hiring a "customer data

representative" who would have had a more limited focus on

ensuring that a future sale of the company or its data complied

with the company's existing privacy policies. But a group of

more than 25 states objected, saying that 23andMe simply wanted

to hire someone who would "tell this court everything is fine."

23andMe has collected genetic data from 15 million customers

who ordered DNA testing kits online and provided saliva samples

to the company. The company has said it won't go through with a

sale that imperils customers' genetic data, but the bankruptcy

has drawn scrutiny from state attorneys general and lawmakers

who warn that customer data could be sold to unscrupulous

buyers.

The consumer protection ombudsman will have an initial

budget of $300,000 for their work, with the ability to ask the

court for more money if needed.

23andMe filed for bankruptcy last month, seeking to sell its

business after a drop-off in consumer demand and a 2023 data

breach that exposed millions of customers' genetic data.

The company is still negotiating with potential buyers for

its business. It had hoped to name a bidder last week to serve

as a minimum bid for other companies to compete against in a

future auction. But those talks remain ongoing, and 23andMe has

pushed the deadline to April 30, Chris Hopkins, a lawyer for the

company, said at Tuesday's hearing.

23andMe founder Anne Wojcicki has also expressed interest in

buying back the company.

During the hearing, attorneys representing a class of more

than 6 million customers affected by the 2023 data breach raised

concerns about the bankruptcy's impact on a $30 million

settlement reached last year. 23andMe's attorneys said the value

of the class action settlement is in dispute now that the

company is in bankruptcy.

Walsh said he will address potential disputes about the

class action settlement at a later date.