WASHINGTON (dpa-AFX) - Artificial intelligence chatbot startup Character.ai has filed for Chapter 11 bankruptcy and plans to pursue a court-supervised sale by the end of the year as it faces mounting legal, regulatory and operational pressures.
Disney has emerged as a potential bidder, agreeing to pay $20 million for certain Character.ai intellectual property and provide transition services through former employees it has hired. The arrangement is expected to help keep the chatbot platform operating during the bankruptcy process.
Founded in 2021 by former Google researchers Noam Shazeer and Daniel de Freitas, Character.ai previously reached a $1 billion valuation following a $150 million funding round. Its bankruptcy filing lists assets of between $50 million and $100 million.
The company has faced several lawsuits alleging its chatbots contributed to suicide, self-harm and other harms involving teenagers.
Character.ai settled five cases earlier this year and introduced additional safety measures, including restricting users under 18 from engaging in back-and-forth chatbot conversations. The company said it could wind down the platform if a sale is not completed.
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