Character.AI files for bankruptcy, Disney to become lead bidder for assets — The Verge
American startup Character.AI, which creates chatbots for communication and role-playing scenarios, has filed for Chapter 11 bankruptcy protection in the United States. The company wants to sell its assets, with Disney set to become the lead bidder, The Verge reports.
In a press release and blog post, Character.AI said the bankruptcy process should facilitate the sale of the company and its assets. The startup noted that over the past year, it had sought to sustain and improve its business amid significant legal, regulatory, and operational challenges.
Terms of the proposed sale
In its bankruptcy filing, Character.AI estimated its liabilities at between $50 million and $100 million. Disney is set to serve as the lead bidder for the startup's assets: its offer will set a baseline for other potential buyers.
Under the terms of the proposed deal, Disney is to pay $20 million for a portion of unspecified assets. The company must also provide transition support by involving former Character.AI employees whom it has already hired, and will receive a non-exclusive license to unspecified intellectual property.
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Staff changes and service operations
Disney joined the process after appointing former Character.AI CEO Karandeep Anand as chief technology officer. Anand led Character.AI for just over a year and oversaw the company's transition to microdramas during that period.
Disney had previously complained that Character.AI was harming its brand and using its intellectual property by allowing the creation of unauthorized chatbots featuring the company's characters. Disney also expects part of Character.AI's technical team to join it.
Character.AI expects to complete the sale process in late November or early December. Until then, the platform's services, including paid subscriptions, are expected to continue operating. At the same time, the company warned that the platform would be shut down if no acceptable offer is received.
