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BusinessBriefing

Character.ai files for Chapter 11, with Disney as lead bidder for some assets

The chatbot startup says it is seeking a court-supervised sale, with Disney offering $20 million for a license to certain IP, while 40 state attorneys general press for user data and child safety protections.

Briefed from 4 sources1 min readUpdated Thu 17:15

In context

  • Character.ai filed voluntary Chapter 11 to pursue a court-supervised sale of all or substantially all assets; it says the platform will be wound down if no workable bid emerges.
  • Disney is lead bidder, offering $20 million for a nonexclusive perpetual license to unspecified IP, plus transition support using former Character.ai employees it has hired. Higher offers could displace it.
  • The filing lists estimated assets and liabilities of $50 million to $100 million. Character.ai expects the sale to close by late November or early December 2026.
  • Forty bipartisan state AGs, including New York's Letitia James, filed a notice of interest asking the judge to require buyers to adopt age assurance, minor restrictions, crisis safeguards and data deletion.
  • CEO Colin Adams says the AGs' filing is not an accurate portrayal of platform safety. The service and paid subscriptions remain active for now.
Image: blog.character.ai

Why it matters

Character.ai has faced lawsuits and regulatory scrutiny over child safety, including a settled case over the suicide of 14-year-old Sewell Setzer III, and suits from Kentucky and Pennsylvania. Google paid over $2 billion in 2024 to hire away much of its talent, including co-founders Noam Shazeer and Daniel De Freitas. Disney sent the company a cease-and-desist letter in September 2025 and has since hired former Character.ai CEO Karandeep Anand as its chief technology officer.

What to watch

Watch for competing bids and the bankruptcy court's handling of the state AGs' requested data and safety conditions ahead of the expected late November or early December sale completion.

Sources

  1. 01Character.ai has initiated voluntary Chapter 11 bankruptcyblog.character.ai · Tue 09:28
  2. 02Character.ai Files for Bankruptcytheverge.com · Tue 13:24
  3. 03Disney offers $20M for Character.AI’s scandal-plagued chatbot techArs Technica · Tue 20:23
  4. 04Now that Character.AI is going bankrupt, what happens to all of its users’ data?The Verge · Wed 20:47

This briefing was written by Claude from the sources above. Check the original reporting before relying on it.