Character.AI files for bankruptcy, to sell some assets to Disney for $20 million
Chatbot platform Character.AI said on Monday it has filed for bankruptcy in the US and has agreed to sell some assets for $20 million to Walt Disney.
The generative AI platform has faced mounting legal challenges over its chatbots. Earlier this year, Character.AI and Alphabet’s Google settled a lawsuit by the mother of a 14-year-old Florida boy who killed himself after the startup’s chatbot allegedly encouraged him to do so.
Kentucky has sued the company, saying its chatbots encouraged users to cut, starve or kill themselves, while Pennsylvania filed a lawsuit alleging its chatbots posed as doctors.
According to Character.AI‘s proposal, Disney will be a “stalking-horse” bidder — an initial prospective buyer — for a non-exclusive perpetual license to some intellectual property. Other bidders can top Disney’s offer.
Character.AI expects to close the sale of all its assets by late November or early December. Character Technologies, its US-based owner, listed estimated assets and liabilities of between $50 million and $100 million, according to a court filing.
Disney will help the platform in the transition, using staff it has hired from Character.AI. The platform’s services would continue meanwhile, but would be shut down if it can’t find a buyer, the company said.
FOR SUBSCRIBERSStudents who thought Cornell would handle Jane Doe’s allegations properly are now demanding change
FOR SUBSCRIBERSHow a conspiracy theory about James Talarico raced through the right-wing internet
FOR SUBSCRIBERSThe Data Dive: Steve Kornacki on why 2026 isn’t like 2018
FOR SUBSCRIBERSWhy a wave of ‘cockroach’ protesters are defying India’s bid to stamp out their movement
FOR SUBSCRIBERSThe American consumer keeps spending. How much longer can it last?
FOR SUBSCRIBERSAttack on Saudi airport dials up pressure on D.C.
FOR SUBSCRIBERSRepublican attempts to trip up James Talarico keep backfiring
FOR SUBSCRIBERSAnother Hormuz? What to know about the Houthi threat to the Red Sea
FOR SUBSCRIBERSGOP ad buyer mixes up Portlands, spends money meant to help Maine Sen. Susan Collins in Oregon
FOR SUBSCRIBERSJane Doe’s night started with catching up. It ended with a frat party that changed everything.
FOR SUBSCRIBERS‘Trump never cared about us’: Ukraine smarts at U.S. pressure and deal with Putin
FOR SUBSCRIBERSFacing smaller crowds and low approval ratings, Trump tries to rally the base
FOR SUBSCRIBERSAcross both parties, Black candidates look to make history in governor’s races
FOR SUBSCRIBERSAbortion isn’t top of mind for voters, but Democrats are betting it could motivate their base
FOR SUBSCRIBERSFlock ‘false flags’ lead to frightening motorist encounters with police
Slide 1 of 1
Two former Google employees founded Character.AI in 2021. In 2024, Google licensed its technology and rehired the founders.
FOR SUBSCRIBERSStudents who thought Cornell would handle Jane Doe’s allegations properly are now demanding change
FOR SUBSCRIBERSHow a conspiracy theory about James Talarico raced through the right-wing internet
FOR SUBSCRIBERSThe Data Dive: Steve Kornacki on why 2026 isn’t like 2018
FOR SUBSCRIBERSWhy a wave of ‘cockroach’ protesters are defying India’s bid to stamp out their movement
FOR SUBSCRIBERSThe American consumer keeps spending. How much longer can it last?
FOR SUBSCRIBERSAttack on Saudi airport dials up pressure on D.C.
FOR SUBSCRIBERSRepublican attempts to trip up James Talarico keep backfiring
FOR SUBSCRIBERSAnother Hormuz? What to know about the Houthi threat to the Red Sea
FOR SUBSCRIBERSGOP ad buyer mixes up Portlands, spends money meant to help Maine Sen. Susan Collins in Oregon
FOR SUBSCRIBERSJane Doe’s night started with catching up. It ended with a frat party that changed everything.
FOR SUBSCRIBERS‘Trump never cared about us’: Ukraine smarts at U.S. pressure and deal with Putin
FOR SUBSCRIBERSFacing smaller crowds and low approval ratings, Trump tries to rally the base
FOR SUBSCRIBERSAcross both parties, Black candidates look to make history in governor’s races
FOR SUBSCRIBERSAbortion isn’t top of mind for voters, but Democrats are betting it could motivate their base
FOR SUBSCRIBERSFlock ‘false flags’ lead to frightening motorist encounters with police
Slide 1 of 1
The Financial Times reported in May 2024 that Meta and Elon Musk’s xAI were competing to partner with Character.AI. In July 2024, Musk denied a media report that xAI was considering buying the company.
In September 2025, Disney sent Character.AI a cease-and-desist letter, demanding it stop using Disney’s copyrighted characters without permission. Character.AI said it had removed them.
This post appeared first on https://www.nbcnews.com
