CHARACTER.AI FILES FOR BANKRUPTCY IN DISNEY ASSET SALE

Character.AI, the chatbot platform that lets users create and converse with AI characters, has filed for Chapter 11 bankruptcy protection in the United States, according to a company statement. The filing is intended to facilitate a sale of the company and its assets, with Disney named as the lead bidder. The company listed estimated liabilities of between $50 million and $100 million in its court filing. Character.AI chief executive Colin Adams said the board had determined that a court-supervised sale process offered the best opportunity to maximise value for stakeholders following a review of available alternatives. The company said it had taken meaningful steps over the past year to sustain and improve its business amid what it described as significant legal, regulatory and operational pressures.

Character.AI, among the early breakout companies of the generative AI boom, has faced a series of lawsuits and scrutiny over the safety of its chatbots in recent years, while continuing to release new products and updates. Under the proposed sale, Disney would pay $20 million for unspecified assets and provide transition support using former Character.AI employees it has already hired. Disney would also receive a non-exclusive licence to unspecified intellectual property. Disney has previously sent cease and desist letters to Character.AI, saying the platform damaged its brand and allowed unauthorised chatbots based on its characters.

Disney's involvement follows its recent hiring of Character.AI's former chief executive, Karandeep Anand, as its chief technology officer. Anand led Character.AI for just over a year, during which the company moved into producing short-form "microdramas". Disney said it expected a number of Character.AI's technical staff to join the company as part of the arrangement. The sale remains subject to the Chapter 11 process, with competing offers able to be submitted against Disney's bid as the baseline.