The conversational avatar platform, founded in 2021, has filed for bankruptcy in Delaware. Disney has opened the bidding with an offer of $20 million, which other bidders can still outbid.
Character.AI has filed for Chapter 11 bankruptcy protection in the Delaware court. The company, which allows AI-generated characters to be created and conversed with, wants to arrange the sale of all or almost all of its assets under the control of the judge. The service remains accessible during the proceedings, which the company hopes to complete in late November or early December.
Disney in the first bidder
An agreement reached before the filing makes Disney the "stalking horse", i.e. the reference offer: $20 million in exchange for a perpetual, non-exclusive license to part of Character.AI's intellectual property and receivables, plus support during the transition. Other candidates may outbid. The rapprochement is not accidental: Disney last month appointed former Character.AI boss Karandeep Anand to the newly created position of CTO, while its lawyers had ordered the start-up in 2025 to remove its protected characters.
The current CEO, Colin Adams, cites legal, regulatory and operational headwinds: the platform has been the target of several complaints related to the security of its chatbots for the past two years. Its founders, both former Google employees, had left for the search giant in 2024 as part of a technology licensing agreement.
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