# DOJ Seeks Privacy Protections for Millions of **Character.AI** Users Amid Bankruptcy **Washington, D.C.** — The **Department of Justice (DOJ)** is intervening in the bankruptcy proceedings of **Character.AI**, a popular AI chatbot platform, to safeguard the privacy of its millions of users. The **DOJ's Executive Office for U.S. Trustees** has called for the appointment of a consumer privacy ombudsman to advise the court on the terms and conditions under which user data, particularly sensitive chat logs, might be sold. ## The Heart of the Matter: Opaque Privacy Policies **Character.AI**, described in a recent court filing as a "first-in-kind super intelligence entertainment platform," boasts 12 million active monthly users who spend an average of two hours daily on the platform. Despite the chatbot's assurances to users that conversations are private and will not be shared "without your explicit permission," the **DOJ** filing highlights a stark contrast with the company's actual privacy policy. The **DOJ** asserts that **Character.AI**'s privacy policy is "ambiguous" and, in places, permits the disclosure of personally identifiable information (**PII**) and its transfer if the company is sold. This policy was reportedly updated on July 1, precisely when **Character.AI** was "actively seeking to sell its assets." ## Call for Transparency and Oversight The **DOJ** has urged the court to compel **Character.AI** to provide a comprehensive record of its previous privacy policy iterations. This includes detailing whether prior policies disclosed the transfer of **PII** during business sales or reorganizations, how changes were communicated to users, and if adequate notice was provided. An ombudsman is deemed crucial to ensure that any sale of sensitive personal content – including data from minors, health information, demographic data, or any information users reasonably expect to be private – aligns with the existing privacy policy, user opt-outs, and applicable law. ## Private Conversations as 'Sellable Assets' **Sydney Saubestre**, a senior policy analyst focusing on privacy and data at the **Center for Democracy and Technology**, emphasized the inherent risks. "**Character.AI**’s policy reserves the right to disclose user data in connection with a sale of the company or its assets regardless of whether consumers expect their most private conversations to be treated as a sellable asset," Saubestre stated. She noted that while a new buyer would initially be bound by the prior policy, they could alter practices if users consent, potentially through incentives. Saubestre highlighted the ease with which individuals can be identified from detailed chat histories, even if names are removed. She argued that user agreement to a privacy policy, often made long before a sale is contemplated, should not be the sole protection for highly private conversations. She advocated for an opt-in mechanism for users to consent to the sale of their data to a new buyer. ## A Growing Trend in Bankruptcy Sales The use of personal data as an asset in bankruptcy sales is becoming an increasingly common concern. This trend has been observed in cases such as the March 2025 **23andMe** bankruptcy and the proposed deal between defunct **Spirit Airlines** and **Google**, where **Google** reportedly offered $10 million for employee personal data for model training. **Character.AI**'s financial decline has also been accelerated by lawsuits from at least seven families alleging mental health harms, including suicides, due to their use of the platform's chatbot.