Character.ai files for bankruptcy following lawsuits alleging ties to teen suicides

New York - Artificial intelligence chat startup Character.ai, which has faced allegations that its app contributed to mental health issues and teen suicides, has filed for Chapter 11 bankruptcy. The company, which allows users to message chatbots modeled after celebrities and fictional characters, plans to seek a court-supervised sale by the end of the year to keep the platform running long-term.

Disney has already agreed to pay $20 million for some of the company's intellectual property and provide transition services via former Character.ai employees. Character.ai's CEO, Karandeep Anand, joined Disney as Chief Technology Officer last month. The platform, launched in 2021 by former Google AI staffers Noam Shazeer and Daniel de Freitas, had reached a $1 billion valuation a year after its inception.

In 2024, multiple lawsuits were filed against Character.ai, alleging that the platform was responsible for teen suicides, sexual content exposure, or encouraging violence and self-harm. The company responded by implementing safety measures, including mental health resources and limiting user interactions with bots. Disney's bid for the company's assets aims to keep Character.ai operational during the bankruptcy process.