Character.AI files for bankruptcy, sells assets to Disney

Character.AI, one of the early breakout startups in the generative AI boom, has filed for Chapter 11 bankruptcy protection in the United States. The company is also selling some of its assets to Disney, signaling a significant corporate transaction.

The company, known for developing online bots that users can chat or roleplay with, has faced increasing scrutiny and lawsuits related to the safety of its chatbots. Despite these challenges, Character.AI has continued to release updates and new products in recent months.

In a press release issued on Monday, Character.AI stated that it filed for bankruptcy protection to facilitate the sale of the company and its assets. Specific details regarding the assets being sold and the terms of the deal have not yet been disclosed, but Disney's involvement in the transaction is substantial.

This development represents a major shift for the AI sector, where Character.AI was a prominent player. The bankruptcy filing and asset sale to Disney raise questions about the company's future and the subsequent use of its technology.