Character.AI Files for Chapter 11 Bankruptcy, Agrees to $20M Asset Sale to Disney

Key facts

• Character.AI filed for Chapter 11 bankruptcy five years after its founding in late 2021.
• Court documents list assets and liabilities between $50 million and $100 million.
• The company agreed to sell some assets to Disney for $20 million and a non-exclusive perpetual license for its technology.
• Disney will provide transition services via former Character.AI employees who joined last month alongside former CEO Karandeep Singh Anand.
• CEO Colin Adams said the board determined a court-supervised sale process provides the best opportunity to maximize stakeholder value.
• The sale process is expected to close in late November or early December, with no bid or buyer yet for the company's assets.
• Character.AI reached unicorn valuation in September 2022 with a $150 million fundraise and reported over 2 billion messages exchanged in five months.
• Google struck a $2.7 billion deal in August 2024 to license Character.AI's models, and founders Noam Shazeer and Daniel De Freitas returned to Google.
• The platform recorded 20 million monthly active users by October 2024.
• Legal troubles included a lawsuit after the suicide of a 14-year-old Florida boy and a Texas investigation into child privacy and safety laws.
• Character.AI raised over $193 million from investors including Lightspeed, SV Angel, Greycroft, and a16z, according to PitchBook.