Disney strikes $20-million deal for Character.ai's assets as AI startup files for bankruptcy

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Set us as preferred Character.ai, a California startup that has faced lawsuits over allegations that chatbots created on its platform harmed the mental health of teens and led to copyright issues, filed for Chapter 11 bankruptcy.The Menlo Park-based company runs an app that allows people to create and interact with chatbots who mimic celebrities, historical figures or other virtual characters.

Founded nearly five years ago by former Google engineers, the company reached a valuation of $1 billion in 2023 as people flocked to the app for entertainment, roleplay and companionship.But trouble started to plague the startup as it grew.

Parents in multiple states sued the startup, alleging in lawsuits that the chatbots harmed their children, even leading some to take their own lives.The company has said it takes safety seriously and has also rolled out new limits for minors on the platform.

Earlier this year, Character.ai and Google agreed to settle several lawsuits filed by families in multiple states, including Colorado, Florida, Texas and New York.Business An artificial intelligence startup is under fire for allegedly releasing chatbots that harmed the mental health of young people.Character.ai has also faced copyright infringement claims about the virtual characters users create on its platform.

Last year, the AI startup removed chatbots that impersonated popular Disney characters such as Elsa and Darth Vader after the Burbank entertainment behemoth sent a cease-and-desist letter.Character.ai said before the bankruptcy filing it struck an agreement with Disney in which the entertainment company agreed to pay $20 million to license certain intellectual property from the AI startup.In a blog post late Monday, Character.ai said it has “taken meaningful steps to sustain and improve” its “business amid significant legal, re...