Character.AI Files for Chapter 11 Amid Multi‑State Investigation; AGs Seek Data Protections

Character. AI announced it is filing for Chapter 11 bankruptcy and has agreed to sell some of its assets to Disney. The move follows a years‑long investigation by New York Attorney General Letitia James and other state attorneys general. A coalition of 40 bipartisan AGs filed a notice of interest in the bankruptcy case to alert all parties that regulatory issues—particularly around consumer data and technology transfer—must be addressed before any sale or transfer of the company’s assets. The attorneys general warn that the transfer of Character. AI’s technology could pose serious risks, underscoring the need for safeguards during the restructuring process.