Article 274: Character.AI Is Going Bankrupt, and 40 Attorneys General Want to Know What Happens to the Data

Character.AI's bankruptcy has become a consumer-protection problem. New York Attorney General Letitia James disclosed a multi-state investigation running for years, and she is now one of 40 bipartisan AGs filing notice in the proceedings — arguing that user conversations should not be treated as just another asset to sell off to the highest bidder. The question is what happens to years of deeply personal chats when the company that held them runs out of money.

Key Takeaway: Bankruptcy is the stress test privacy policy never runs. Consent given to a living company turns out to be an agreement with whoever ends up holding the database — which is exactly the gap that 40 attorneys general are now trying to close after the fact.

Source: The Verge, 14 October 2026