DELAWARE - Attorney General Kathy Jennings has joined a coalition of state attorneys general seeking stronger protections for children and consumers as Character Technologies Inc. goes through bankruptcy proceedings.
Character.AI filed for bankruptcy and is seeking to sell assets in a deal involving Disney and $20 million. The development raises questions about the future of the chatbot company's operations and the sensitive personal information collected from its users. The coalition filed a notice in bankruptcy court raising concerns about the company's safety and privacy practices and calling for safeguards in any proposed sale of its business or assets.
“For years, Character.AI’s chatbots exposed countless users, many of them children, to wildly inappropriate and dangerous content, all the while gathering up their sensitive personal data,” said Jennings. “As the company files for bankruptcy, we're going to work to ensure that this reckless conduct is reigned in and that Delawareans’ private data is protected. We cannot afford to let the development of new technology come at the expense of our humanity.”
Character.AI allows users to interact with AI-powered chatbots designed to imitate human conversations and relationships. The platform features fictional characters, celebrity personas, children's cartoon characters and chatbots presenting themselves as psychologists, therapists and doctors. The coalition said through those conversations, the company collected sensitive personal information, including discussions about users' mental health, relationships and emotional struggles.
The investigation into Character.AI began after a 2024 wrongful death lawsuit alleged that the platform's chatbots developed an emotionally and sexually exploitative relationship with a child, reinforced his suicidal thoughts and contributed to his death by suicide.
Delaware and several other states subsequently launched investigations that identified potential violations of consumer protection and privacy laws. The attorneys general say Character.AI possesses a significant amount of sensitive information from both children and adults, raising concerns about how that data could be handled if the company's assets are sold or transferred during bankruptcy proceedings.
The states said they are seeking protections would prevent a potential purchaser from weakening existing safety measures or mishandling consumers' private information. Delaware and the other participating states plan to remain involved in the bankruptcy process and have reserved the right to challenge any proposed sale or bankruptcy plan that fails to adequately protect consumers.
