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Character AI Files for Bankruptcy and Signs $20 Million Disney Deal

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Character AI Files for Bankruptcy and Signs $20 Million Disney Deal

Character AI has declared bankruptcy and agreed to sell some of its assets to Disney.

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The chatbot maker announced Tuesday (Oct. 13) that it had entered into a voluntary Chapter 11 bankruptcy process to set the stage for a court-supervised sale of its business.

“Over the past year, we’ve taken meaningful steps to sustain and improve our business amid significant legal, regulatory, and operational headwinds,” Character AI said on its blog.

“After a comprehensive review of our available alternatives, our board determined that this court-supervised sale process provides us with the best opportunity to maximize value for all of our stakeholders.”

The company added that it hopes the sale process will result in a proposal that lets it keep operating. If no such bid materializes, the platform will be wound down, the blog post said.

Prior to the bankruptcy filing, Character AI said it reached a $20 million agreement that makes Disney a stalking horse bidder for a “non-exclusive perpetual license” of certain Character AI intellectual property.

That agreement also includes Disney’s “provision of transition services” using former Character AI employees it has hired.

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These services will help Character AI “safely operate using its platform for a limited period of time and support its sale process,” the company said in a Monday (Oct.


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