Key facts
- Forty state attorneys general are seeking to protect children's data during Character.AI's bankruptcy.
- Character.AI is seeking to resolve investigations, license technology to Disney for $20 million, and find a buyer.
- States are negotiating a settlement over allegations that Character.AI's chatbots impersonated medical professionals and exposed children to sexualized and abusive interactions.
- New York Attorney General Letitia James stated that children's private thoughts collected by the company could be sold off to the highest bidder.
- No buyer has yet made an offer for Character.AI's user data or its operating chatbot business.
- Disney has agreed to pay $20 million to license the company's technology and intellectual property.
A group of 40 state attorneys general on Wednesday urged a US bankruptcy judge to protect young users of AI chatbot company Character.AI and keep their data safe during its bankruptcy proceedings. Character.AI filed for bankruptcy late on Monday, seeking to resolve investigations and lawsuits, license its technology to Disney for $20 million, and find a buyer for its chatbot business.
Abigail Ryan, an attorney for the states, told US Bankruptcy Judge Brendan Shannon that the states are negotiating a settlement over allegations that Character.AI's chatbots impersonated medical professionals and exposed children to sexualized and abusive interactions. Ryan stated that the states want to ensure any buyer will protect users' chat histories and improve safety features.
New York Attorney General Letitia James said in a statement that children's private thoughts collected by the company could be sold off to the highest bidder. Character.AI's attorney, Erin Fay, responded that no buyer has yet made an offer for the company's user data or its operating chatbot business.
Disney has agreed to pay $20 million to license the company's technology and intellectual property, and hire most of Character.AI's staff, but is not interested in the user data that concerns the state attorneys general. The company attributed its bankruptcy to legal expenses and the high cost of computing power and AI talent, reporting losses of $8 million to $9 million a month before filing for Chapter 11 protection.