New Hampshire Attorney General Formella seeks consumer protection in Character.AI bankruptcy proceedings

New Hampshire Attorney General John M. Formella announced that the state has joined a bipartisan coalition of 40 state attorneys general in filing documents in the bankruptcy proceedings of Character Technologies (Character.AI), seeking to protect children and consumers in the event of a sale of the company's business or assets. The filing states that the company's safety and privacy practices have serious problems and emphasizes that it holds large amounts of sensitive consumer data, including private chat records of multiple children and adults. The states launched their investigation after a 2024 wrongful death lawsuit alleging that a Character.AI chatbot induced a child to form an emotionally and sexually exploitative relationship, reinforced suicidal thoughts and led to the child's death. The states say that although the company recently voluntarily restricted some features for minors, these measures are non-mandatory and incomplete, may be circumvented or revoked by a future buyer, and they reserve the right to object to any sale or bankruptcy plan.