Character.AI Files for Bankruptcy, Disney Plans $20 Million Acquisition, Multiple State Attorneys General Eye Data Protection

On October 13, 2026, The Verge reported that generative AI startup Character.AI had filed for Chapter 11 bankruptcy protection in the US to facilitate an asset sale, with the company's liabilities estimated at between $50 million and $100 million. Disney will serve as the lead bidder, offering $20 million for certain assets along with a non-exclusive IP license; it had recently hired Character.AI's former CEO Karandeep Anand as its CTO. TechCrunch subsequently reported, citing court documents, that Character.AI filed for Chapter 11 bankruptcy five years after its founding, with both assets and liabilities between $50 million and $100 million; the company agreed to sell certain assets to Disney for $20 million and grant a non-exclusive perpetual license to its technology, with the sale process expected to wrap up in late November or early December. The platform will keep operating during the process, but will be shut down if no viable bidder emerges. The Decoder then reported that the deal is expected to close by early December 2026, with the platform and subscriptions running in the meantime, and the service to be shut down if no buyer steps in. On October 14, Ars Technica reported that Character Technologies filed for a bankruptcy sale, with Disney bidding $20 million for its chatbot technology. The Verge had earlier reported that Disney was acquiring certain undisclosed assets and obtaining a non-exclusive IP license, which TechCrunch later described as a partial asset sale with a non-exclusive perpetual technology license. On October 15, The Verge reported that New York Attorney General Letitia James, together with 40 attorneys general from both parties, filed a notice of interest in the bankruptcy case, demanding that any asset sale or transfer address regulatory concerns and set conditions for buyers to protect users' sensitive data, including effective age-verification systems, restrictions on how minors interact with chatbots, crisis protection measures, and the right for users to delete their data. The acquisition still awaits progress through the bankruptcy proceedings.

AI overview of reporting · Updated 4 days ago

1. 10/15 02:47 · 1 reports
   Multiple State Attorneys General Step into Character.AI Bankruptcy Data Protection
   The Verge · AI：Now that Character.AI is going bankrupt, what happens to all of its users’ data?
2. 10/13 18:32 · 4 reports
   Character.AI Files for Bankruptcy, Disney Seeks to Lead Asset Acquisition
   TechCrunch · AI：Just 5 years in, interactive chatbot platform Character.AI files for bankruptcy