Disney made the deal with Character.AI conditional on bankruptcy proceedings, according to a court filing
According to a court filing, Disney required the deal with Character.AI to be completed through bankruptcy proceedings. It has already hired most of the staff, but acquiring the technology licence is subject to an auction and court approval. The future operation of the platform remains uncertain.
According to a legal filing cited by WIRED, Disney required the deal with Character.AI to be completed through bankruptcy proceedings because of dwindling cash and significant litigation and regulatory risks. In September, it had already hired most employees from Character.AI, including the then-CEO. The deal also includes five months of assistance from some of the transferred employees to keep the platform running.
TechCrunch reports an agreed sale of some assets for 20 million dollars. Citing court filings, WIRED provides a more detailed breakdown: 5.5 million dollars already paid, a refundable deposit of 2 million dollars and a further 12.5 million dollars upon completion of the transaction. The final payment depends on Disney winning the auction and court approval. The proposed transaction covers a perpetual, worldwide, non-exclusive technology licence; according to WIRED, the list of intellectual property to be transferred excludes user data and the platform website. Disney also prepared a proposed court order under which Character.AI would retain responsibility for existing legal liabilities; this is not an approved outcome of the proceedings.
Character.AI filed for Chapter 11 bankruptcy protection on 12 October. In a court document, it listed assets and liabilities, each in the range of 50–100 million dollars. According to management, the platform is to continue operating during the sale process, which is expected to conclude in late November or early December. However, CEO Colin Adams said that the platform would shut down if no offer allowing continued operation was received.
A bipartisan group of 40 US attorneys general has also joined the proceedings. In a notice filed with the court, they called for consumer data protection to be addressed in any sale or transfer of assets. New York Attorney General Letitia James also disclosed the existence of a multistate investigation into Character.AI that has been underway for several years. The company already faces lawsuits concerning the safety of its chatbots.
Why it matters
Hiring the employees and the planned sale of a technology licence do not guarantee that the service will remain available to users. Prospective asset buyers must also assess which rights they would actually acquire and how user data protection and unresolved legal liabilities will affect the sale.
What was added since the original report
Verified updates
-
The petition for bankruptcy protection was filed on 12 October.; According to a legal filing, Disney required the deal to be completed through bankruptcy proceedings.; Disney hired most employees from Character.AI, including the then-CEO.; The proposed perpetual, worldwide, non-exclusive technology licence is to be auctioned.; According to a statement by the new CEO, the bankruptcy proceedings are intended to enable an agreement with the plaintiffs and the states conducting investigations.
- The petition for bankruptcy protection was filed on 12 October.
- According to a legal filing, Disney required the deal to be completed through bankruptcy proceedings.
- Disney hired most employees from Character.AI, including the then-CEO.
- The proposed perpetual, worldwide, non-exclusive technology licence is to be auctioned.
- According to a statement by the new CEO, the bankruptcy proceedings are intended to enable an agreement with the plaintiffs and the states conducting investigations.
-
A bipartisan group of 40 US attorneys general filed a notice in the bankruptcy proceedings.; The attorneys general are calling for consumer data protection to be addressed in any sale or transfer of assets from Character.AI.; Letitia James disclosed a multistate investigation into Character.AI that has been underway for several years.
- A bipartisan group of 40 US attorneys general filed a notice in the bankruptcy proceedings.
- The attorneys general are calling for consumer data protection to be addressed in any sale or transfer of assets from Character.AI.
- Letitia James disclosed a multistate investigation into Character.AI that has been underway for several years.
-
The company lists assets of 50–100 million dollars in a court document.; The company lists liabilities of 50–100 million dollars in a court document.; The agreed price for the assets being sold to Disney is 20 million dollars.; The deal with Disney includes a non-exclusive, perpetual technology licence.; According to management, the platform will shut down if no offer allowing continued operation is received.
- The company lists assets of 50–100 million dollars in a court document.
- The company lists liabilities of 50–100 million dollars in a court document.
- The agreed price for the assets being sold to Disney is 20 million dollars.
- The deal with Disney includes a non-exclusive, perpetual technology licence.
- According to management, the platform will shut down if no offer allowing continued operation is received.
Two audiences, two different impacts
What this means
For individuals
If you use the Character.AI platform for conversations or character creation, its long-term availability has yet to be confirmed; management acknowledges that it could shut down without a suitable offer.
For a business
For prospective buyers of assets from Character.AI, the scope of the technology licence is crucial: according to court filings, it excludes user data and the website. The allocation of legal liability and the conditions for data protection remain part of the bankruptcy proceedings.
Risks and complianceCheck the original
Event sources
confirmed by 3 independent sources · 3 publishers, 3 independent. We count feeds from the same owner only once.