How Bankruptcy Moved Custody Without Making Data a Free-For-All
The 23andMe bankruptcy did not use a single, obvious handoff from one company to another. It used an auction, a two-step Equity Toggle, and a fallback Plan Toggle. Understanding those states is essential to judging what changed: the estate sought value for a functioning business, TTAM sought control of that business, and customers and states asked whether the structure changed who could use genetic information. The transaction mechanics show why a stronger consent requirement could have changed not only the legal form of the sale but also the privacy and economic result.
The auction made continuity part of the value
A bankruptcy sale of substantially all of a company’s assets is not merely an internal reorganization. The buyer’s price, the creditors’ recovery, and the court’s assessment of the transaction all depend on what is being sold and how quickly it can be preserved as a going concern.
The 23andMe debtors first sought bids for their assets through a court-supervised process. The opening bid was $52 million, and seven bidders participated in the auction that began on May 14, 2025. Regeneron Pharmaceuticals emerged from the initial auction as the successful bidder at $256 million, with TTAM Research Institute as the backup bidder at $146 million. TTAM then submitted additional proposals. After the court authorized a final round of bidding, TTAM’s $305 million offer became the starting bid on June 13; Regeneron did not submit a higher offer, and TTAM was selected as the winning bidder.
Those numbers matter less as a contest between companies than as evidence of the court’s business-judgment analysis. The transaction was not justified only by the existence of a valuable database. A higher bid created more money for the bankruptcy estate, while a buyer willing to continue the same business could preserve the operational context in which the data was collected and used. The court’s opinion described the $305 million transaction as including $302.5 million in cash and noted that it represented nearly a six-fold increase over the opening bid.
The price also had a privacy dimension. Customers affected by the 2023 breach were among the main creditor groups, and the court saw no obvious alternative source of recovery other than insurance coverage and the bankruptcy estate. A transaction that preserved the business and generated more cash could therefore serve an interest that privacy objectors also cared about: compensation for people whose information had already been compromised.
That does not turn a high bid into proof of a good privacy outcome. A sale can produce money and still create new risks. It means only that the court had to evaluate the transaction as a connected system. Price, continuity, customer rights, future safeguards, and closing speed were not separate scorecards. They influenced one another.
The Equity Toggle had two linked transitions
The court-approved structure was called the Equity Toggle. Its name can make it sound like a technical choice about corporate form, but it determined how the data-related asset interest moved.
The first step would create Newco, a wholly owned limited-liability company. Newco would purchase the debtors’ assets, including customer data, in exchange for a promissory note. The sale was to be free and clear of liens, claims, and encumbrances—a bankruptcy phrase describing the estate’s ability to deliver the transferred property without carrying certain old burdens into the buyer’s ownership. It did not mean that the court had declared customer privacy rights nonexistent. The court separately considered what interests customers retained and what laws governed the transfer.
The second step would sell all of the debtors’ equity interests in Newco to TTAM, also free and clear. After closing, TTAM would be the sole owner of the subsidiary that housed the genetic data and other assets. The same end state could therefore be described in two ways. Economically, TTAM would acquire a functioning genetic-testing business. Legally, the estate first transferred its business-held interests to Newco and then transferred control of Newco to TTAM.
This sequence mattered to the states’ objections. The first step looked like a transfer of genetic data from the debtors to a new entity. The second step looked like a change in ownership of the entity that held the data. Different statutes can attach different consequences to a transfer of data, a disclosure to a person, and a change in corporate ownership. The court could not answer the privacy question without tracing the steps separately.
The structure also preserved operational continuity. TTAM was headed by 23andMe co-founder and former chief executive Anne Wojcicki. The court said TTAM expected to operate in essentially the same manner, make offers to the debtors’ employees, and keep the same limited number of people with access to customer data. The transaction did not contemplate disclosing genetic data to new people who had not previously had access.
That continuity was part of the buyer’s case for approval. Customers would deal with a familiar service, familiar employees, and the same basic privacy policy, with additional protections negotiated for the new custodian. It was also part of the states’ concern. A change in ownership can matter even when the immediate staff and systems remain unchanged, because the new owner may later redirect the business. The court acknowledged that TTAM could eventually choose a different direction and that a future incident could expose or increase the risk to customer data.
The Plan Toggle was a real alternative, not a procedural footnote
The debtors and TTAM also negotiated a Plan Toggle. If used, it would have completed the transaction through confirmation of a Chapter 11 plan rather than through the Equity Toggle. TTAM would become the sole owner of reorganized debtors, but the assets—including the data—would not move out of the debtors, even into an affiliate. The ownership outcome could look similar while the legal path was different.
That difference changed the consent analysis. If the assets stayed with the debtors, the states’ objections to a transfer from the debtors to Newco would not apply in the same way. The court reasoned that the Plan Toggle would not require customer consent before confirmation because customers and the debtors would remain in the same legal and practical positions with respect to the data. That conclusion was specific to the plan structure and the court’s analysis; it was not a universal rule that reorganizations never affect privacy rights.
The Plan Toggle also imposed costs. The court said preparing and confirming a plan would take several months, during which the debtors would continue to lose money, pay interest on post-petition financing at 14 percent per year, and incur professional fees. The debtors estimated losses of $20 million or more. The judge described the estimate as plausible but not directly supported by the evidentiary record, so it should be treated as a comparative estimate rather than an audited total.
The comparison was not simply “consent versus no consent.” The court saw two packages:
- The Equity Toggle involved a technical transfer of the data-related asset interest, but it came with TTAM’s privacy enhancements, including continuing deletion and research opt-out rights.
- The Plan Toggle avoided that technical transfer, but it would not carry those same negotiated enhancements and would delay closing while the estate continued to incur costs.
The court also thought the Plan Toggle was likely confirmable and likely to receive broad support. That made it a credible fallback rather than an empty threat. But a fallback can be legally cleaner on one dimension and worse on another. If the parties were forced to use it, customers might lose the additional protections attached to the Equity Toggle even as the estate lost time and value.
Why a stronger consent rule could change the outcome
The Consumer Privacy Ombudsman called separate express opt-in consent the strongest protection from a consumer-privacy perspective. The proposal would have required the company to obtain affirmative consent from each customer before transferring the data, or at least before allowing TTAM to use a particular customer’s data. In isolation, that is an attractive safeguard: it makes the change in custody visible and gives each person a direct choice.
The court nevertheless declined to impose it in this transaction. First, the judge viewed the immediate effect on privacy as limited because the same business, employees, leaders, and policies would continue, with additional safeguards. Second, an opt-in campaign could prevent the Equity Toggle from closing at the current price. The transaction documents represented that TTAM could use personal information without undue restriction or delay; a court-imposed consent requirement could have changed the buyer’s willingness to close. Third, the Plan Toggle offered a fallback that required no customer consent in the court’s analysis but also lacked the Equity Toggle’s privacy enhancements.
This reasoning does not say that opt-in consent is unimportant. It shows why the real comparison was between feasible transaction paths, not between an ideal consent campaign and an unprotected sale. If an opt-in requirement made the Equity Toggle impossible, the parties might have used the Plan Toggle, accepted tens of millions of dollars in added expense, or—if the estate could not bear that expense—converted the cases to Chapter 7. The judge concluded that imposing a requirement unlikely to be fulfilled could produce less privacy protection overall.
That is a consequentialist judgment, and it has limits. It depends on the court’s assessment of the parties’ choices and on the evidence about each alternative. Another case might involve a different buyer, new personnel, a new business purpose, or a transaction with no privacy enhancements. The fact that a fallback existed here does not give every debtor permission to design around a consent rule by changing its corporate structure.
The transaction was designed to preserve a relationship, not just a file
The court’s approval rested on more than the existence of a promissory note or a high bid. It rested on a prediction that TTAM would keep operating the same business and that customers would have the same or better privacy experience. The promised continuity included the same limited access group, the petition-date privacy policy, and customer abilities to delete accounts and data and opt out of research. The privacy enhancements were part of the value of the chosen structure.
At the same time, the court identified customers who might not be able to opt out because they had lost login credentials, were deceased, ignored communications, or otherwise could not act. It acknowledged that no sale order could guarantee protection after closing. The structure reduced some risks; it did not make them disappear.
The most accurate description is therefore neither “the database changed hands” nor “nothing changed.” The estate changed the entity that owned and administered the business-held interests. The same employees and service could continue, so immediate access and purpose might remain stable. Customers’ rights and applicable privacy laws remained relevant. And the transaction’s economic value depended on preserving the business long enough to produce recovery for creditors.
The mechanics give us a precise baseline for the legal judgment: an asset interest moved through Newco, corporate control moved to TTAM, the operating relationship was meant to continue, and the Plan Toggle remained a different route to a similar ownership result. The remaining question is how those facts interact with the court’s reading of bankruptcy law, privacy policies, and state genetic-privacy rules.