Character.AI Files for Bankruptcy After 28 Potential Buyers Decline

Character.AI filed for bankruptcy protection, the company confirmed, after contacting 28 potential acquirers and failing to secure a viable acquisition offer, according to aitimes.com. The AI character chat service launched in 2022.

Financial figures disclosed in the filing show monthly revenue reached $5.3 million in August, while monthly operating losses stood at $8–9 million. Disney offered $20 million for some intellectual property but required a Chapter 11 bankruptcy process.

Character.AI had previously deleted chatbots imitating characters including Elsa and Darth Vader after Disney demanded an end to unauthorized use of its characters.

The company launched its service in September 2022 and grew quickly as a platform for chatting with celebrities, historical figures and film or game characters. In August 2023, it reported 4.2 million monthly active users on US mobile apps, near ChatGPT's 6 million.

In August 2024, Google secured usage rights to Character.AI's technology in a $2.7 billion deal and hired co-founders Noam Shazeer and Daniel De Freitas along with key researchers. Earlier, in 2024, the company discussed research cooperation with Meta, and reports said Elon Musk considered acquiring it, which Musk denied; negotiations with OpenAI were also reported.

Character.AI had introduced a monthly subscription and advertising, and expanded into character customization, AI video and interactive storytelling. After a 14-year-old US boy who had long conversations with its chatbot died in 2024, the family filed a lawsuit that October, followed by claims from other users and state lawsuits.