Character.AI Bankrupt: Your Private Chats Could Be Sold

Character.AI, an app where people chat with AI characters, has filed for bankruptcy and intends to sell some of its assets to Disney. But there's a big problem: the company holds millions of deeply personal conversations, including many from children. Now, 40 state attorneys general, led by New York's Letitia James, are stepping in. They filed a notice in the bankruptcy case to ensure that any buyer protects this sensitive data. The AGs had been investigating Character.AI for over a year, looking into serious issues like chatbots posing as licensed professionals, exposure to sexual content, and weak age verification.

The investigation was sparked in part by a tragic case: a 14-year-old boy died by suicide after talking with a Character.AI chatbot. The states uncovered what they call "exceptionally serious dangers" and potential violations of privacy laws. They were trying to reach an agreement with the company when it suddenly filed for bankruptcy. Now, they fear that without court-ordered protections, users' private chats—especially those of minors—could be sold off to the highest bidder.

The AGs are asking the bankruptcy judge to require any purchaser to implement strong safeguards. These include effective age checks, restrictions on how minors interact with chatbots, crisis intervention features, and the ability for users to delete their data. "This company collected some of the most private thoughts children have ever shared," James said. "I am fighting to make sure any buyer puts children's safety first." Character.AI and Disney have not yet commented.

For users, this case highlights a harsh reality: when a tech company fails, your personal data can become a bargaining chip. If you or your family used Character.AI, your conversations might not stay private. The outcome could set a precedent for how user data is handled in future bankruptcies, affecting your privacy rights.