New York AG Seeks Protections for User Data in Character.AI Bankruptcy

New York Attorney General Letitia James has announced a multi-state investigation into AI firm Character.AI's bankruptcy proceedings, aiming to ensure protections for consumer data during any asset sale.

James, alongside 39 other bipartisan state Attorneys General, filed a notice of interest in Character.AI's Chapter 11 bankruptcy case. This action alerts all parties involved to the regulatory issues that must be addressed in any sale or transfer of the company's business or assets.

Character.AI announced Tuesday it was filing for Chapter 11 protection and selling some assets to Disney. However, the AGs expressed concerns about significant risks associated with the transfer of the technology, particularly regarding "hi..." (full story available on The Verge).

The development highlights growing scrutiny over how user data is handled by AI companies, especially during financial distress or ownership changes.