AI News · Hot news ·
Character.AI files for Chapter 11 bankruptcy and agrees to sell some assets to Disney
Character.AI, the platform for chatting with user-created AI characters, has filed for Chapter 11 bankruptcy, TechCrunch reported. A court document lists assets and liabilities of between $50 million and $100 million. The company agreed to sell some assets to Disney for $20 million and will run a court-supervised sale process.
Key points
- Character.AI filed for Chapter 11 with assets and liabilities between $50 million and $100 million.
- Disney agreed to buy some assets for $20 million plus a non-exclusive perpetual technology license.
- The platform will be wound down if no workable bid emerges in the sale process.
What happened: Character.AI has filed for Chapter 11 bankruptcy, TechCrunch reported, after a series of lawsuits and struggles to scale its platform. A court document puts its assets and liabilities at between $50 million and $100 million. CEO Colin Adams said the board chose a court-supervised sale process because it offers the best opportunity to maximize value, citing significant legal, regulatory and operational headwinds.
The details: Character.AI agreed to sell some assets to Disney for $20 million and to grant Disney a non-exclusive perpetual license for its technology. The service will keep running during the sale, which is expected to close in late November or early December. Adams said there is not yet a bid or buyer, and that if no workable bid emerges, the platform will be wound down.
Background: Former Google engineers Noam Shazeer and Daniel De Freitas founded the company in late 2021. In August 2024 Google paid $2.7 billion to license its models and both founders returned to Google. The company reached 20 million monthly active users by October 2024. It was later sued over the death of a 14-year-old user, faced a Texas investigation into child privacy and safety compliance, settled some lawsuits, added safety features and banned minors. According to PitchBook, it raised over $193 million from investors including Lightspeed and a16z.
What to watch: TechCrunch noted that high engagement drives up AI costs and pressure to monetize, which makes consumer AI products hard to scale profitably. Whether a buyer steps in before the sale closes will decide if the platform survives.
Our take
Teams relying on consumer AI apps should weigh vendor durability, since even a platform with 20 million monthly users could be wound down.