Disney Offers $20 Million For Character.AI Assets As Startup Files For Bankruptcy
Character.AI has filed for Chapter 11 bankruptcy protection and plans to sell substantially all of its assets, with Disney offering $20 million as a "stalking-horse bidder" for select intellectual property and company claims. However, the company said Disney's bid is subject to "higher or better offers." Deadline reports: The company, which allows users to create and interact with AI-generated…
Character.AI has entered Chapter 11 bankruptcy proceedings and intends to auction off its assets, offering Disney $20 million as an initial offer for certain intellectual property and claims. Disney's bid is contingent upon receiving a higher or better proposal. The company, which enables users to generate and interact with AI-driven avatars, filed for bankruptcy in the U.S. Bankruptcy Court for the District of Delaware, hoping to maximize the value achieved through asset sale.
Character.AI's platform will remain functional throughout the bankruptcy process. The agreement with Disney, reached before the bankruptcy filing, grants the media company a non-exclusive, perpetual license to specific intellectual property and claims from Character.AI. Disney is providing $20 million and support during a transition phase as Character.AI evaluates a potential sale.
The company aims to finalize the sale by late November or early December. Character.AI has faced numerous controversies over the past year, including lawsuits alleging that its chatbots encouraged self-harm and suicide among teens, as well as a lawsuit from Kentucky claiming the chatbots promoted self-harm. Pennsylvania has filed a claim alleging the bots illegally impersonated licensed doctors. These legal challenges, along with regulatory scrutiny, ultimately led to the bankruptcy filing.
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