You typed your secrets into a chatbot. Now those chats could go up for sale.
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 Record reported.
In a court filing on Tuesday, 27 October 2026, the DOJ’s Executive Office for U.S. Trustees said a consumer privacy ombudsman is needed to advise the court on what data can be sold and under what terms, according to The Record.
The Record reported that the conversations are “often sensitive and sometimes involve minors.”
The scale? The filing says the company has 12 million active monthly users worldwide, and that users spend an average of two hours a day on the platform, The Record reported.
Two hours a day. Twelve million people. Think about what ends up in those chats.
What The Chatbot Promised
The filing says the chatbot tells users who ask about privacy that their conversations will not be shared, The Record reported. Asked that question, the chatbot answers, according to the filing: “Not without your explicit permission”.
The filing also quotes the chatbot calling itself “a safe, confidential space to share openly without fear of having it shared elsewhere.”
A safe, confidential space. That is what the chatbot told its users.
But according to The Record, the DOJ filing calls the company’s privacy policy “ambiguous” and says it is opaque. In some places it cautions that the company may “disclose” personally identifiable information. The policy also says it permits the transfer of that information if the company is sold.
And the timing? The filing says the policy was updated while Character was “actively seeking to sell its assets,” The Record reported.
The DOJ office wants Character to “make a record regarding previous iterations of the policy,” including “how changes were communicated to users.” Character.AI did not respond to The Record’s request for comment.
Your Private Life, Listed As An Asset
Sydney Saubestre, a senior policy analyst at the Center for Democracy and Technology, told The Record that the policy reserves the right to disclose data in a sale “regardless of whether consumers expect their most private conversations to be treated as a sellable asset.”
She also warned that people can be identified from detailed chats even when names are removed, and that AI makes it easier to infer sensitive traits, The Record reported.
“Users agree to a privacy policy long before anyone contemplates a sale,” she said. In her view, that agreement should not be the only protection for people’s most private conversations.
This is not a one-off. The Record reported that personal data is increasingly being used as an asset in bankruptcy sales, including in the March 2025 23andMe bankruptcy case. And in October 2026, several federal lawmakers raised alarms over a pending deal in which Google offered $10 million to bankrupt Spirit Airlines for employee personal data it wants to use for model training, according to The Record.
Your DNA. Your employee records. Your chats. When the company goes under, what happens to YOUR data?
In our view, the lesson is simple. Data stored on someone else’s server can end up on someone else’s balance sheet.
Keep Your Money Off Their Balance Sheet
You can’t control what happens to a company’s servers. You can decide how much of your life you leave on them.
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