Fuck AI

I imagine it will be some fanart. In a legal sense, that character would probably be the intellectual property of whoever owns the work. In an artistic sense, Green invested the time and effort to create this specific artwork.

The general vibe in fanart communities I've been in is that you're allowed to take bits from other people's work and make something new with them, so long as you also invest the time and effort to actually make something artistic yourself and give credit. It's also considered good manners to ask the artist for permission, as a gesture of acknowledgement and respect for the work they put in.

Red contributed nothing, asked nothing, just shoved it into an AI to slop up some animated version. On top of the general disdain that actual artists tend to have for AI-generated content, that's just plainly disrespectful.

In that framing, Red is correct that Green doesn't own the character, but wrong to assert that Green also doesn't own the artwork. How that would shake out in a legal sense, I don't know, but it's a dick move either way.