Character.AI Bankruptcy Puts Millions of User Chats at Risk of Sale
Updated
Updated · Computerworld · Oct 30
Character.AI Bankruptcy Puts Millions of User Chats at Risk of Sale
3 articles · Updated · Computerworld · Oct 30
Summary
Character.AI’s bankruptcy has opened a court-supervised asset sale that could transfer data tied to millions of account holders, including highly sensitive chats about mental health, relationships and private voice calls.
The risk stems from a vague privacy policy allowing disclosure of “certain information” in a sale, while bankruptcy law does not clearly address whether trained LLMs can carry user data to a buyer.
The US Trustee Office wants a consumer privacy ombudsman appointed, and a judge could restrict the sale of company records, but it remains unclear how far those protections would reach.
53% of 1,944 Americans surveyed did not know chatbot conversations may be used for training, and only a quarter knew chats can be subpoenaed, underscoring how poorly users understand the exposure.
The case highlights a broader AI-industry problem: chats can leak through bugs, sharing features or model training itself, and deleting records may not remove their influence from trained systems.