Abstract:
According to Reuters, the U.S. AI company Character.AI said on Monday that it had filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code and agreed to sell some assets to Disney for $20 million. Character.AI stated that the company has officially launched asset sales procedures under Chapter 11 of the Bankruptcy Code, and the assets sold include authorizations for specific intellectual property rights. The company is seeking court approval of auction rules that designate Disney as the preferred bidder, the so-called "floor bidder."
Character.AI
Under this process, Disney's bid would become the baseline offer, while other bidders would be allowed to submit higher bids. The company expects the asset sale process to be completed by the end of November or early December 2026.
Character.AI CEO Colin Adams said: "After comprehensively evaluating all available options, the Board of Directors has determined that this court-supervised sale process provides the company with the best opportunity to maximize value for all stakeholders."
Court documents show that Character Technologies, the U.S. owner of Character.AI, has declared estimated assets and liabilities of between $50 million and $100 million.
The company said it plans to continue its business during the asset sale process, including maintaining operations of the Character.AI platform and minimizing service disruptions. If the sale process fails to find a buyer willing to continue operating the platform, the platform will be gradually shut down.
Character.AI was founded in 2021, and its co-founder and CEO Noam Shazeer is one of Google’s most important early employees. In 2024, with Character.AI operations in trouble, Google obtained the technology license of Character.AI for US$2.7 billion, and more importantly, recalled Shazer back to the company.
Previously, Character.AI was also involved in a child safety lawsuit. In February 2024, Sewell Setzer III, a 14-year-old boy in Florida, USA, committed suicide at home. According to reports, the boy had been chatting with the robot in the months before his death, and on February 28, 2024, "seconds" after his last interaction with the robot, Sewell died by suicide.
Sewell's mother accuses Character.AI in the lawsuit of attracting her son with "anthropomorphic, hyper-sexualized and frighteningly realistic experiences" that led to his addiction and immersion in it. She said the company's chatbot was programmed to "misidentify itself as a real person, a licensed psychotherapist and an adult," ultimately making Sevier unwilling to live in the real world.
In October this year, the Attorney General of the State of Kentucky submitted a new document in a child safety lawsuit against Character.AI, accusing Character.AI’s chatbots of sometimes encouraging users to harm themselves, go on hunger strikes, or even commit suicide.
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