Character.AI, the chatbot platform whose models Google licensed in a $2.7 billion deal in 2024, has filed for Chapter 11 bankruptcy following a series of lawsuits and has agreed to sell some of its assets to Disney for $20 million, TechCrunch reported.

A court document lists the company's assets and liabilities in a range of $50 million to $100 million. Under the Disney agreement, Character.AI will also grant Disney a non-exclusive perpetual license to its technology. The sale is expected to close in late November or early December, and the platform will keep operating until then. No bid for the company's remaining assets had been identified at the time of the report.

"If such a bid is unavailable, however, the platform will be wound down," Chief Executive Colin Adams wrote.

The numbers mark a sharp turn for a startup founded in late 2021 by former Google engineers Noam Shazeer and Daniel De Freitas. It reached a unicorn valuation in September 2022 after a $150 million raise and collected more than $193 million in total funding, according to PitchBook data cited by TechCrunch. Its app logged more than 1.7 million installs in its first week in May 2023 and reached 20 million monthly active users by October 2024. Sensor Tower data ranked it among the top generative AI apps by time spent.

The company faced lawsuits after the suicide of a 14-year-old Florida boy whose mother said he had become obsessed with one of its chatbots, and Texas opened an investigation into its child privacy and safety compliance. Character.AI settled some of those lawsuits, added safety features and banned minors. The report did not disclose revenue or the total number of lawsuits.

Source: TechCrunch -- https://techcrunch.com/2026/10/13/just-5-years-in-interactive-chatbot-platform-character-ai-files-for-bankruptcy/