Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
AI Chats Lose Privilege Protection In US Court Ruling
February 17 2026 | Market Insight | Artificial Intelligence Governance
Image: Freepik
Court Ruling Flags Legal Risk Tied To AI Conversations
On February 17 2026, a New York federal court ruled in United States v. Heppner that written exchanges between a defendant and Anthropic’s Claude are not protected by attorney client privilege or the work product doctrine.
AI Conversations Became Discoverable Records
The case centred on about 31 documents that recorded the defendant’s interactions with Claude. Investigators collected the files during a search after the defendant received a grand jury subpoena and understood he was under investigation. He used Claude to generate reports that outlined possible defence strategy and potential legal and factual arguments. He did this on his own rather than at the direction of his lawyer.
See: AI Governance Gaps Exposed By Legal Leaders
The court applied standard privilege rules and found the documents fell outside protection. Judge Jed S. Rakoff explained that discussions between non-lawyers were not privileged and that privilege depended on a confidential relationship with licensed counsel. The court also found the Claude conversations were not confidential because they involved a third party platform and the platform’s privacy policy alerted users that data could be collected and disclosed.
Sharing With Counsel Later Did Not Change The Outcome
HSF Kramer’s analysis of the ruling explains how client side use of public generative AI tools could weaken privilege claims. The defendant argued that he created the Claude reports to prepare for conversations with his lawyer and later shared them with counsel. The court rejected that argument. Because the defendant used the tool independently and Claude disclaimed providing legal advice, the documents did not become privileged simply because counsel received them later.
The court reached the same result under the work product doctrine. That doctrine protects materials prepared by or at a lawyer’s direction to safeguard legal strategy. Since the defendant created the documents himself, the court found they did not reflect counsel’s mental impressions or strategy.
The defendant’s approach reflected a workflow many teams now follow. People often use generative AI to organize facts, test arguments, or prepare notes before speaking with a lawyer. In practice, AI can feel like a private drafting space. The Heppner ruling shows that this assumption creates risk because privilege depends on lawyer involvement and confidentiality at the time material is created, not later.
What This Means For Fintech Teams
This decision shows how everyday AI use can create governance risk. Fintech teams often rely on generative AI to draft internal notes, explore regulatory interpretations, test legal arguments, and shape product thinking.
When teams create prompts and outputs outside privileged workflows, those materials may be treated like ordinary internal documents and may surface in litigation, investigations, or regulatory reviews.
See: Tumbler Ridge Tests AI Evidence and Escalation Controls
The Heppner outcome also challenges a common assumption that AI drafts become privileged once shared with a lawyer. Timing and intent matter. If teams generate strategy or legal framing before counsel becomes involved, privilege arguments may already weaken. Enterprise AI environments may offer stronger confidentiality controls, but the decision shows privilege still depends on lawyer involvement and clear intent to obtain legal advice.
Talking Point
If generative AI captures early legal and strategic thinking, should fintech governance treat AI prompts with the same care as internal legal memos and executive communications?
Privilege depends on how and when material is created, not what you do with it later.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
|---|---|---|
 |  |  |
Leave a Reply