Character.AI bankruptcy: states push to protect private chat data

In its October 20 announcement, North Carolina's Department of Justice said a coalition of attorneys general had raised the handling of sensitive user information in Character.AI's bankruptcy. The concern includes conversations about relationships, emotional struggles, and mental health. The office wants limits on transfers and subsequent use of that information. [1]

The underlying notice was filed on October 14 in the Delaware bankruptcy case. It flags privacy and regulatory issues for any sale or transfer of the business or its assets. These are the states' stated concerns and positions; the filing does not itself establish that a buyer has received private conversations. [3]

The company's October 12 update describes a voluntary Chapter 11 process intended to find a buyer. Its FAQ says subscriptions remain active and billing is unchanged for now. It also says existing privacy and security practices remain in place and points users toward account deletion and data export. Those statements describe the company's position, not an independent security assessment. [2]

Spicy's takeThe personality in a chat window can feel familiar. The company handling the conversation can still change hands. For users, the useful next development is a concrete explanation of any transfer, the protections attached to it, and the controls available beforehand. A comforting character response cannot answer those questions on the company's behalf. [1][2]