Character.AI Files for Bankruptcy; Disney Bids $20M for IP License

Character.AI has filed for Chapter 11 bankruptcy protection to pursue a court-supervised sale of its remaining assets. Disney $DIS has agreed to act as the initial bidder, offering $20M for a non-exclusive, perpetual license to certain Character.AI intellectual property. The bankruptcy filing lists between $50M and $100M in estimated assets, alongside an equal range of liabilities. The consumer chatbot platform will continue operating temporarily, though Character.AI warned it could shut down entirely if no buyer steps in to maintain the service. The bankruptcy follows a turbulent year for the startup, which included Disney poaching its former CEO last month and multiple legal settlements regarding underage user safety. "Over the past year, Character.ai has taken meaningful steps to sustain and improve its business in the face of significant legal, regulatory, and operational headwinds," — Colin Adams.