Character.AI Files for Chapter 11 Bankruptcy; Disney Serves as Initial Bidder

Character.AI has filed for Chapter 11 bankruptcy protection to facilitate a court-supervised sale of its assets. The company reported estimated liabilities and assets both ranging between $50 million and $100 million. The platform remains operational, though management indicated a potential service shutdown if a viable buyer is not secured.

Disney has emerged as the initial bidder, offering $20 million for a non-exclusive, perpetual license to specific intellectual property. This bid is subject to a competitive auction process, with a final sale expected by late November or early December. The move follows Disney’s recent recruitment of Character.AI’s former CEO and several technical staff members.

The company has faced significant operational and legal challenges, including litigation regarding user safety and psychological harm involving minors. These liabilities, alongside previous intellectual property disputes with Disney, have impacted the firm’s stability. The bankruptcy process aims to resolve these outstanding claims while maximizing value for stakeholders through asset liquidation.