Character.AI filed for Chapter 11 bankruptcy on Oct. 12 in Delaware and named Disney as the lead bidder in a court supervised sale of its assets, according to Unite.AI and CXO Digital Pulse.
Disney Worldwide Services agreed to pay $20 million for a nonexclusive, perpetual license to certain Character.AI intellectual property and related claims, both outlets reported. The bid is a stalking horse offer, meaning other buyers can submit higher bids before the sale closes.
Character.AI said it plans to keep operating through the sale process, which it expects to conclude in late November or early December, but said it would wind down if no buyer emerges to keep the platform running.
Chief executive Colin Adams said the board "reviewed the available alternatives before deciding to pursue the court-supervised sale" and considered it "the best opportunity to maximise value for all stakeholders."
Character.AI, founded in 2021, built one of the first breakout consumer chatbot platforms of the generative AI boom and faced legal, regulatory and operational challenges over the past year before filing, Unite.AI reported. A bankruptcy filing from a company that had enough traction to keep shipping products is a reminder that user growth and legal exposure can outrun revenue, a risk any founder building consumer AI products for a general audience should weigh.