Character.AI has filed for Chapter 11 bankruptcy in the United States. The company, which develops AI-powered chatbots, is currently facing legal and regulatory challenges regarding product safety.
The startup's total liabilities are estimated between $50 million and $100 million. Disney has emerged as the primary bidder for the company's assets, offering $20 million for undisclosed intellectual property and assets.
As part of the deal, Disney will provide transition support and has already hired former Character.AI employees. Disney previously appointed former Character.AI head Karandeep Anand as its chief technology officer.
The company expects to finalize the sale process by late November or early December. During this period, all services and paid subscriptions will remain operational, though the platform may face closure if no suitable buyer is found.
This is the second time the company has faced a significant loss of talent. In 2024, Google acquired a large portion of the startup's staff, including co-founders Noam Shazeer and Daniel De Freitas, in a deal valued at over $2 billion.
