Character.ai Bankruptcy Puts Millions of Users’ Data Up for Sale
Summary
Character.ai is going bankrupt, and court filings say it can sell user data to buyers other than Disney. Experts warn that the Character.ai bankruptcy shows how AI privacy risks can follow users even after a firm collapses, and 40 US state attorneys general have asked the judge for protections.
Key Highlights
- Character.ai agreed to sell some assets to Disney for $20m (£14.95m).
- User data is not part of the Disney deal.
- Court filings say the company can sell data to other buyers.
- A coalition of 40 US state attorneys general wants child safety and privacy protections.
What Happened?
Character.ai, a chatbot company used by tens of millions of people, including children, is going bankrupt. It agreed to sell some assets to Disney, but court filings say user data can go to other buyers. The 40 state attorneys general filed a notice asking the judge to put child safety and privacy protections in place.
Why is it Important?
Calli Schroeder, director of the AI and Human Rights Program at the Electronic Privacy Information Center, says people share more sensitive details with a personified bot. Users also describe friends and family, so non-users can end up in the data. Bankruptcy is often listed as an exception in privacy policies, she said, so protections can stop applying. Character.ai’s policy allows data to be used to build features, train AI models, and create user profiles for targeted advertising, which a buyer could do too.
Impact and Implications
Melissa Jacoby, a law professor at the University of North Carolina at Chapel Hill, said the states can do only so much without stronger US privacy protections. Rules in places like the EU are stronger, but data is still sold in bankruptcies, and buyers generally must follow the original privacy policy. Schroeder fears Character.ai may be the first of many if the AI sector hits a downturn. A Character.ai spokesperson said the company has settled lawsuits over teen safety but did not answer specific questions about children’s data.
What Happens Next?
Character.ai’s instructions for data deletion were published in its bankruptcy announcement. Experts suggest checking privacy settings or the privacy policy of any service holding sensitive information. Customer support can help if those fail. The court has not yet ruled on the states’ request.