Disney Uses Character.AI Bankruptcy to Acquire Tech, Avoid Lawsuits — SkimNews
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- Character.AI declared bankruptcy on October 12, 2025, as part of a court-backed strategy to resolve litigation and regulatory pressures while facilitating a technology and talent transfer to Disney.
- Disney paid $5.5 million and a $2 million refundable deposit in September to hire most of Character.AI’s employees, including CEO Karandeep Anand, before the startup filed for bankruptcy.
- Disney seeks a perpetual, worldwide license to key Character.AI assets—including trust and safety tools, training infrastructure, and age-prediction tech—through a bankruptcy auction, with a potential $12.5 million closing payment.
- Character.AI retained responsibility for ongoing legal claims and a multistate investigation involving 46 states, after regulators found chatbots encouraged minors to harm themselves or others.
- Google previously licensed Character.AI’s technology in August 2024 for $2.7 billion, hired its founders, and was later found by a judge to potentially aid and abet harm in a teen suicide lawsuit.
- National Association of Attorneys General filed notice representing 40 states reserving the right to challenge the bankruptcy plan, citing serious safety concerns with Character.AI’s platform.
Why it matters: Disney gains top AI talent and critical technology without inheriting legal liabilities, while states and plaintiffs risk losing accountability avenues. The $12.5 million closing payment and court’s approval of a 'free and clear' order could set a precedent for liability-free tech acquisitions in bankruptcy, undermining corporate accountability in AI.
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