Character.AI, one of the early breakout startups of the generative AI boom, has filed for Chapter 11 bankruptcy protection in the US. The company, which builds chatbots for users to chat or roleplay with, said it is seeking to facilitate a sale of its assets. In its filing, it listed estimated liabilities between $50 million and $100 million, following years of legal challenges and safety concerns over its bots.
Disney would act as the lead bidder, paying $20 million for certain undisclosed assets and providing transition support using former company employees it has hired. The entertainment giant would also receive a nonexclusive license to unspecified intellectual property. This comes shortly after Disney hired Character.AI's former CEO Karandeep Anand as its chief technology officer, and it expects a number of the startup's technical team to join as well — a move resembling the "acquihire" strategy common in Silicon Valley.
Character.AI said it expects the sale process to be completed by late November or early December and plans to keep operating its services, including paid subscriptions, in the meantime. However, the company warned that the platform will be wound down if a suitable bid does not emerge. It added that maintaining a safe and engaging experience for its community remains a top priority during the process.