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Character.AI just filed for bankruptcy, and former foe Disney may buy it for parts

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Character.AI just filed for bankruptcy, and former foe Disney may buy it for parts

Over its short life, the company lost key employees and faced multiple legal challenges.

Character.AI, a controversial generative AI startup that lets users create their own chatbot characters, has filed for Chapter 11 bankruptcy. The company, which lost key talent to Google and had its former CEO hired by Disney, allowed Disney to make the first offer on its assets for $20 million, pending higher offers. Character expects the sale to be completed by early December.

In its blog post, Character said it filed for Chapter 11 protection to facilitate the sale of the company and its assets, listing liabilities of between $50 million and $100 million. As the lead "stalking horse" bidder, Disney would buy certain assets and provide transition support using staff it previously hired from Character.AI. The platform's services will continue, but could be shut down if a buyer isn't found.

Character.AI allows users to create characters and their personalities, while setting specific parameters like the name, voice, description and greeting. Those can then be published to the community for others to chat with, or placed in specific scenarios. They can be based on fictional media sources or wholly original.

The site, which first appeared in 2022, ran into problems you'd expect from an AI company of this nature. Pennsylvania sued Character over chatbots pretending to be doctors, and the company was investigated by Texas over what the state AG called "misleading" mental health claims. Disney put a cease-and-desist order on the company over the use of its cartoon characters, and banned teens from talking to its chatbots last year.


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