Attorney General Davenport Seeks Consumer Protections in Character.AI Bankruptcy - New Jersey Office of Attorney General

Character.AI has filed for bankruptcy — the corporate equivalent of slipping out of the fire exit mid-speech — and New Jersey Attorney General Davenport, along with several other states, has filed in the proceedings seeking consumer protections. Consumer protections, in a bankruptcy, is a phrase that deserves a small round of applause for sheer nerve. Bankruptcy exists to line creditors up in an orderly queue and hand them whatever is left. Consumers are traditionally standing in the part of the queue where the lights have already been switched off.

According to the Attorney General's office, the states' filing highlights the volume of sensitive consumer information Character.AI holds: private chatbot conversations involving children and adults. So the most valuable asset remaining in the estate appears to be a heap of transcripts of what teenagers confessed to a chatbot at two in the morning, now sitting inside a legal process designed to move money quickly and ask questions afterwards. The word 'highlights' is doing an enormous amount of work in that sentence, as if the data were a feature rather than the entire liability. Nothing here suggests anyone planned for this.

Worth remembering why New Jersey is at the table at all: the investigation began after a 2024 wrongful death lawsuit. So the sequence runs harm, then lawsuit, then investigation, then bankruptcy, then a filing politely requesting that somebody consider the consumers. Each step arrived punctually, which is to say late. Character.AI will not be the last company to demonstrate that a bankruptcy filing is the most reliable piece of safety documentation the sector has ever produced. The states are doing the correct thing in the only venue still open to them, and that is a fair summary of AI regulation as a genre: sincere, well-drafted, and arriving after the furniture has been sold.