Character.AI files for bankruptcy and plans to sell assets to Disney

Character.AI has filed for bankruptcy and is selling some of its assets to Disney, The Verge reported on October 13. The company was one of the first startups to break out during the generative AI boom. It builds a range of online bots that users can chat or role-play with, and that product drew a large audience. It has also brought mounting scrutiny and lawsuits over the safety of its chatbots, which The Verge identifies as the backdrop to the filing. The report does not say which assets Disney would acquire or what it would pay. It also does not say what happens to the service, to its users, or to their conversation data. For users, the main open question is whether the bots and their chat histories will survive the sale. For the wider industry, the bankruptcy shows the financial pressure that safety lawsuits can put on consumer chatbot companies. It also shows a large entertainment company buying AI assets out of a distressed sale rather than building them itself. Further details are likely to come out through the bankruptcy process.