Disney has agreed to serve as the lead bidder for Character.AI’s assets after the chatbot company filed for Chapter 11 bankruptcy protection. The bid is valued at $20 million for certain undisclosed assets, part of a sale process Character.AI says it expects to complete by late November or early December.
Character.AI, which builds online bots for users to chat or roleplay with, listed estimated liabilities between $50 million and $100 million in its bankruptcy filing. The company said it filed for Chapter 11 to facilitate the sale of the business and its assets rather than to shut down immediately.
What Disney Is Seeking In The Asset Sale
As part of the proposed deal, Disney would receive a nonexclusive license to unspecified intellectual property from Character.AI, according to The Verge. Disney would also provide transition support for the acquired assets using former Character.AI employees it has already hired, and the company expects a number of Character.AI’s technical team members to join Disney as part of the arrangement.
What It Means For Character.AI’s Business
Character.AI said it plans to keep operating its services, including paid subscriptions, while the bankruptcy sale process plays out. The company warned, however, that the platform will be wound down if no suitable bid emerges from the process.
In a statement reported by The Verge, Character.AI said, “Over the past year, we’ve taken meaningful steps to sustain and improve our business amid significant legal, regulatory, and operational headwinds.” The company added, “As we navigate this process, maintaining a safe and engaging experience for our community remains a top priority.”
Character.AI has faced mounting scrutiny and lawsuits over the safety of its chatbots, along with broader legal, regulatory and operational pressure over the past year, according to the outlet. The filing follows a turbulent stretch for the company that began in 2024, when Google spent more than $2 billion to hire away much of Character.AI’s talent, including co-founders Noam Shazeer and Daniel De Freitas.
Disney’s History With Character.AI
Disney has previously accused Character.AI of damaging its brand and exploiting its intellectual property by allowing unauthorized chatbots built around Disney characters, according to The Verge. Disney had sent cease-and-desist letters to Character.AI over those unauthorized bots before the bankruptcy filing.
The two companies also share a direct personnel link. Karandeep Anand served as Character.AI’s CEO for just over a year, a tenure during which the company moved into microdramas, before Disney hired him as its chief technology officer.
What’s Next
Character.AI expects the bankruptcy sale process to close by late November or early December. Until then, the company says its services, including paid subscriptions, will continue operating. If no suitable competing bid emerges, the company has warned it will wind down the platform.
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