GoKawiil40 state AGs flag data risks in Character.AI's Chapter 11 sale to Disney
New York AG Letitia James and a bipartisan coalition of roughly 40 state attorneys general filed a notice in Character.AI's bankruptcy case, warning that any sale or transfer of its assets must address consumer protection and privacy concerns. Character.AI filed for Chapter 11 this week and is selling some assets to Disney. The filing discloses that several states had been investigating the company since 2024 over child safety and privacy issues, following a lawsuit tied to a 14-year-old's suicide after interacting with the chatbot.
GoKawiil's interpretation of the reporting above, not reported fact.
The AGs' intervention suggests regulators want to ensure that sensitive user conversation data and unresolved safety violations don't simply pass to a new owner without oversight. Because the investigation was unresolved when bankruptcy was filed, the proceeding could become the venue where these consumer protection questions are ultimately decided, potentially shaping how AI chatbot data is treated in future corporate sales.
- Roughly 40 state AGs filed notice in Character.AI's bankruptcy case over data and safety concerns.
- States had been investigating Character.AI since 2024 for alleged child safety and privacy violations.
- Character.AI is selling some assets to Disney as part of its Chapter 11 filing.
Source: theverge.com — Lauren Feiner, 2026-10-14
Published there as: “Now that Character.AI is going bankrupt, what happens to all of its users’ data?”
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