New York Attorney General intervenes in Character.AI bankruptcy over data privacy concerns

New York Attorney General Letitia James, leading a coalition of 40 bipartisan state attorneys general, has filed a notice of interest in the bankruptcy proceedings of Character.AI. The move follows a multi-state investigation into the company's data practices. The regulators are seeking to ensure that consumer data remains protected during the bankruptcy process, specifically addressing concerns regarding the potential sale of user information to third parties. As the AI startup navigates its financial insolvency, the coalition aims to hold the company accountable for its regulatory obligations and protect the privacy of its user base. This intervention highlights the growing scrutiny from government officials regarding how generative AI companies handle sensitive personal data, especially when facing liquidation or acquisition. The attorneys general are demanding transparency and strict safeguards to prevent the misuse of consumer information as the company's assets are liquidated.