Character.ai declares bankruptcy, citing legal and business woes
AI company has faced multiple lawsuits from families who claimed their teenage children died by suicide or harmed themselves after using its platform.
Character.ai has filed for Chapter 11 bankruptcy protection, with the company's CEO citing "significant legal, regulatory and operational headwinds" as the cause of its financial troubles. The business will continue operating as it seeks to sell its intellectual property, with The Walt Disney Co. agreeing to a $20 million non-exclusive, perpetual license.
Character.ai's technology creates custom AI chatbots for users, but the company has faced scrutiny and litigation, including a 2026 settlement with Google over suicides allegedly linked to its platform. Several states have also sued Character.ai over alleged harm to children. The company believes a court-supervised sale will maximize value by late November or early December, maintaining a focus on user safety during the transition. Subscriptions remain active, and customer data is protected per the company's privacy policy.
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