In a significant turn of events, Florida-based data broker National Public Data has filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. This move comes in the wake of a massive data breach that has sparked a deluge of class-action lawsuits.

The Fallout of a Major Leak

The company, specializing in background checks, is grappling with legal challenges following a breach that compromised hundreds of millions of social security numbers and other sensitive personal information. The parent company, Jerico Pictures, faces enormous damage claims and announced the bankruptcy proceedings at the end of September in the U.S. Bankruptcy Court for the Southern District of Florida in Fort Lauderdale. According to recent disclosures, Jerico Pictures anticipates having to notify "hundreds of millions of potentially affected individuals" and cover the costs for credit monitoring services.

In December of the previous year, cybercriminals successfully infiltrated National Public Data's systems. By April 2024, the security breach came to light when the threat actor known as "USDoD" attempted to sell the stolen data for 3.5 million USD. The leaked data included names, email addresses, phone numbers, social security numbers, and postal addresses. Security researchers estimate that 272 million social security numbers and 600 million phone numbers of U.S. citizens were stolen.

Legal Challenges Mount

The Federal Trade Commission (FTC) is investigating the breach, and more than 20 states have threatened civil penalties against National Public Data for failing to protect consumer data. Additionally, multiple class-action lawsuits have already been filed against Jerico Pictures, accusing the company of inadequate data protection.

Bankruptcy to Manage Legal Pressures

Filing for Chapter 11 bankruptcy typically allows companies to restructure their finances under court supervision. However, documents indicate that Jerico Pictures lacks the resources to cover legal fees and potential fines. The company reportedly cannot generate sufficient revenue to address its "massive potential liabilities," let alone defend against the lawsuits and assist with investigations. The debtor's insurance has denied coverage, and Jerico Pictures has reported total assets valued between 25,000 and 75,000 USD. Income statements show net earnings of 475,526 USD for 2022 and 865,149 USD for 2023.

PC Magazine notes that the bankruptcy filing seems to be a strategy to cope with the wave of lawsuits. Following the bankruptcy claim, a Florida court temporarily suspended the first class-action lawsuit filed against Jerico Pictures.

This information was originally reported by heise online.