Founded only five years ago, interactive chatbot platform Character.AI files for bankruptcy

Character.AI has filed for Chapter 11 bankruptcy protection and agreed to sell certain assets and a non-exclusive perpetual license to its technology to Disney for $20 million. Court documents show the company's assets and liabilities are between $50 million and $100 million. CEO Colin Adams said the sale process is expected to complete by the end of November or early December, but no buyer has bid yet, and if no one bids, the platform will be shut down. The company was founded in 2021 by former Google engineers Noam Shazeer and Daniel De Freitas, reached a unicorn valuation in 2022 with custom character chat, and in August 2024 Google licensed its models for $2.7 billion, with the two founders returning to Google. Since then, following a lawsuit stemming from the suicide of a 14-year-old Florida boy and a Texas investigation, the company settled some lawsuits, added safety features, and banned minors.