Character.AI bankruptcy follow-up: 40 US state attorneys general seek protection for user data being sold; New York discloses years-long multistate probe (report)

Verified (fact)

According to The Verge, New York Attorney General Letitia James disclosed a multistate investigation into Character.AI that has been under way for several years. Forty bipartisan state attorneys general filed a notice of interest in the Character.AI bankruptcy case. They aim to demand safeguards for consumer data sold in the bankruptcy process and to inform the parties involved that regulatory issues exist.

Why it matters (interpretation)

It is a case of regulators stepping in over whether user data such as chat logs can be sold as an asset when an AI chatbot company goes bankrupt. It could also affect the deal under which some assets are going to Disney.

Sources

• Press Now that Character.AI is going bankrupt, what happens to all of its users' data? The Verge

Story thread

1. 2026-10-13 Character.AI files for bankruptcy, with some assets to be sold to Disney (report)
2. 2026-10-13 Character.AI's bankruptcy is a Chapter 11 filing, with some assets going to Disney for $20 million (report)
3. 2026-10-14 Character.AI bankruptcy follow-up: 40 US state attorneys general seek protection for user data being sold; New York discloses years-long multistate probe (report)

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