# DOJ raises privacy concerns over potential sale of Character.AI chats > Source: > Published: 2026-10-30 20:45:00+00:00 # DOJ raises privacy concerns over potential sale of Character.AI chats The Department of Justice is seeking privacy protections for millions of Character.AI customers whose chats and data might be sold as the firm goes through bankruptcy. The DOJ’s Executive Office for U.S. Trustees said a consumer privacy ombudsman is needed to advise the court on how to regulate what data can be sold and under what terms. The court has the power to restrict the sale of user data, which, in the case of conversations with Character’s chatbots, are often sensitive and sometimes involve minors. The judge could block the sale of user data held by Character, which DOJ’s bankruptcy office notes has an “ambiguous” privacy policy suggesting it can sell at least some users’ chat histories. Character is a “first-in-kind super intelligence entertainment platform that allows users to have immersive, multimodal experiences with fictional or imagined characters,” the office said in a Tuesday [court filing](https://www.documentcloud.org/documents/28860246-show-temp-18-1/).  The company currently has 12 million active monthly users worldwide and customers typically spend an average of two hours a day on the platform, according to the filing. The Character chatbot tells users who ask if their conversations are private that they will not be shared, the filing said. “Not without your explicit permission,” the filing quotes the chatbot saying. “I’m here as a safe, confidential space to share openly without fear of having it shared elsewhere. I respect your privacy, and I won’t share anything from our conversation unless you give the okay.” In reality, the Character privacy policy is opaque, the DOJ court filing said, and in some places cautions the AI company may “disclose” personally identifiable information (PII). The policy also says it permits the transfer of PII if the company is sold. The privacy policy was updated on July 1 while Character was “actively seeking to sell its assets,” the court filing said. Character should “make a record regarding previous iterations of the policy, including whether it disclosed that transfers of PII may be made during the sale of [Character’s] business or during a reorganization process, how changes were communicated to users, and if [Character] provided sufficient notice of such changes,” according to the filing. The ombudsman is particularly needed to ensure the sale of sensitive personal content such as minors’ data, health or demographic data or “any information users would reasonably expect to be private is consistent with the privacy policy, any opt outs, and applicable law,” the filing said. [Character.Ai](http://character.ai) did not respond to a request for comment. ## Private conversations, ‘sellable asset’ People provide chatbots with specific and intimate data which can identify them even if names are removed before data is sold. AI also makes inferring sensitive traits easier, according to Sydney Saubestre, a senior policy analyst focused on privacy and data at the Center for Democracy and Technology. “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 said via email. While the new buyer would be bound by the prior privacy policy, Saubestre said, the buyer can change those practices if consumers consent, which some might do if they are offered incentives. Many people do not realize how easy it is to be identified by detailed chats that occur over several months even when they are purported to be anonymous. “Users agree to a privacy policy long before anyone contemplates a sale, and that agreement shouldn’t be the only protection for their most private conversations,” she said. “At the very least, customers of the seller should have to opt into the sale of their data to the buyer.” Personal data is increasingly being used as an asset in bankruptcy sales, including in the March 2025 23andMe bankruptcy case. Earlier this month, several federal lawmakers sounded the alarm about a pending deal between now defunct Spirit Airlines and Google, which has offered $10 million to the bankrupt airline for reams of employee personal data it wants to use for model training. At least seven families of users who have committed suicide or suffered mental health [harms](https://therecord.media/kentucky-character-ai-chatbot) allegedly due to their use of Character’s chatbot have sued the firm, hastening its financial decline. Suzanne Smalley is a reporter covering digital privacy, surveillance technologies and cybersecurity policy for The Record. She was previously a cybersecurity reporter at CyberScoop. Earlier in her career Suzanne covered the Boston Police Department for the Boston Globe and two presidential campaign cycles for Newsweek. She lives in Washington with her husband and three children.