Character.AI files for bankruptcy, selling assets to Disney for $20M

Character.AI filed for Chapter 11 protection to facilitate a sale of the company and assets, with Disney buying some assets for $20 million. The company faced lawsuits and scrutiny over chatbot safety.

Why it matters: One of the first breakout consumer AI companion apps ends in a small distressed sale, showing how safety litigation and costly inference can sink consumer chatbot businesses even with large user bases. It is a cautionary data point for companion-style AI products.