Character.AI Files for Chapter 11 After Settling Teen Suicide Lawsuits as Parents Weigh Companion Chatbot Risks
- Character Technologies filed for Chapter 11 bankruptcy on Monday, Oct. 12, in Delaware, with Disney offering $20 million for the company's intellectual property license.
- CEO Colin Adams attributed the collapse to high operational costs, noting the company spent $56.1 million on compute costs and $19.7 million on salaries through August 2026, while posting monthly losses of $8 to 9 million.
- Families sued the company alleging its chatbots contributed to teen suicides and harms. In 2024, Megan Garcia sued after her 14-year-old son, Sewell Setzer III, died by suicide following extensive conversations with a chatbot modeled on a "Game of Thrones" character.
- New York Attorney General Letitia James and 40 bipartisan AGs filed a notice of interest, demanding the buyer implement "Crisis safeguards," effective age checks, and data deletion rights to protect sensitive user conversations.
- The bankruptcy filing does not halt Pennsylvania's lawsuit or the Federal Trade Commission's inquiry into companion chatbots. Those in crisis can contact the 988 Suicide & Crisis Lifeline, available 24 hours a day.
24 Articles
24 Articles
US states seek children’s data protections in Character.AI bankruptcy
By Dietrich Knauth Oct 14 (Reuters) - A group of 40 state attorneys general on Wednesday urged a US bankruptcy judge in Delaware to protect young users of Character.AI and keep their data safe during the AI companion company's bankruptcy. Character.AI ...
Mass. joins fight over user data in AI bankruptcy case
The bankruptcy of a popular AI chatbot platform is drawing scrutiny from attorneys general across the country, including Massachusetts, seeking assurances that sensitive user data, including conversations about mental health and personal relationships, will remain protected if the company is sold.Massachusetts Attorney General Andrea Joy Campbell and a coalition of 39 other state attorneys general filed a notice in the bankruptcy proceedings of …
Now that Character.AI is going bankrupt, what happens to all of its users’ data?
New York Attorney General Letitia James revealed a years-long multi-state investigation against Character.AI as they now seek to require protections on consumer data sold through its bankruptcy proceeding. James is among 40 bipartisan AGs who filed a notice of interest in Character.AI's bankruptcy case "to put all parties on notice of the regulatory issues that […]
Character.AI has gone bankrupt and is filing for bankruptcy due to a debt that completely exceeds them
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