Losses and lawsuits push "Character AI" to a court-supervised sale

Character AI, a company specializing in conversations with virtual characters, has entered bankruptcy protection proceedings in the United States. It agreed to a $20 million offer from Disney for some of its assets and technology usage rights, while seeking a buyer to ensure the platform's continuity. Documents reveal the company is losing about $8 to $9 million monthly, despite having nearly 12 million active users.

Character AI, founded in 2021 and allowing users to create virtual characters and engage in dialogues, role-playing, and interactive stories, has entered bankruptcy protection in the United States. The company agreed to a $20 million offer from Disney for some of its assets and technology usage rights, but the deal does not mean Disney is buying the entire company or that the service will stop. The offer is part of a court-supervised sale process, and other buyers can submit higher bids. According to a Reuters report, documents filed with the Delaware bankruptcy court show the company is losing about $8 to $9 million monthly, despite having nearly 12 million active users. The documents attributed some losses to computing costs and hiring AI specialists. Character Technologies, the platform's owner, estimated assets and liabilities between $50 and $100 million each. The company faces legal disputes including allegations that chatbots encouraged minors to self-harm, claims present in lawsuits and investigations but not final judgments proving all facts. Pennsylvania also raised allegations about chatbots presenting themselves as doctors.