Character.AI, the platform that lets users create and chat with AI characters, has filed for Chapter 11 bankruptcy after five years of operation, citing assets and liabilities of between $50 million and $100 million. The company has agreed to sell some assets to Disney for $20 million, along with a non-exclusive perpetual license to its technology. Disney will provide transition services through former Character.AI staff who joined it last month with former CEO Karandeep Singh Anand.
CEO Colin Adams said the board concluded that a court-supervised sale offered the best route to maximize value following significant legal, regulatory and operational headwinds. He said the platform will keep running during the process, expected to close in late November or early December, but noted no buyer has emerged and that the service will be wound down if no viable bid arrives.
Founded in late 2021 by former Google engineers Noam Shazeer and Daniel De Freitas, the startup reached unicorn status in 2022 and later hit 20 million monthly active users. Both founders returned to Google in 2024 under a $2.7 billion model licensing deal. The company then faced lawsuits, including one tied to a teenager’s death, and a Texas investigation, leading it to add safety features and ban minors. It had raised over $193 million from investors including a16z and Lightspeed.
