Character.AI

The Justice Department's bankruptcy trustees office asks the court overseeing Character.AI's Chapter 11 case to appoint a consumer privacy ombudsman before any sale of its chat data can proceed, arguing the company's own privacy policy is too ambiguous to protect years of conversations from roughly 12 million monthly users, with data from minors and mental-health topics singled out as especially sensitive.

A Chapter 11 court filing shows Disney paying roughly 9x more for former Character.AI staff ($180 million in retention over three years for about 65 employees) than for the company's actual IP ($20 million for a non-exclusive license) — with CEO Colin Adams warning the platform will be wound down entirely absent a rival bidder.

Files for Chapter 11 bankruptcy, citing "significant legal, regulatory and operational headwinds," after Kentucky and Pennsylvania attorneys general sued over child-safety harms — a case study in state enforcement, not federal rulemaking, setting the real limits on consumer AI.