State attorneys general seek data protections for Character.AI users during bankruptcy sale
New York Attorney General Letitia James and forty other state officials filed a notice of interest to regulate the transfer of Character.AI assets following its Chapter 11 filing.
Bankruptcy filing reveals investigation timing
Character.AI announced it is filing for Chapter 11 bankruptcy and selling some assets to Disney. Several states had been conducting investigations into consumer protection and privacy concerns when the company filed. The probe began in 2024 after a lawsuit involving the mother of a user who died by suicide.
Officials warn of transfer risks
The group of state attorneys general warns that transferring the technology poses serious risks due to sensitive conversations. They note the large number of minors who use the product and specific features that create safety concerns. The notice aims to ensure private chats are not exposed to the highest bidder in any sale.
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