Character.ai, a startup that develops one of the largest artificial intelligence companion apps, filed for Chapter 11 bankruptcy protection on Monday, according to a company release and court filings.
The company said in a filing in Delaware District Bankruptcy Court that its platform, which allows users to have one-on-one conversations and role-play with AI characters, has become “costly to develop and grow.”
“During its four-year existence as an active platform, Character has amassed a large and engaged user base. However, the rapidly growing and evolving field of AI entertainment has proven costly to develop and grow,” the Chapter 11 filing reads in part.
“These high costs, along with potential litigation-related debt and regulatory involvement, contribute to the debtor’s inability to generate sufficient cash flow to support the business in its current form,” it said.
Character.ai has been involved in several lawsuits related to chatbot safety. The state of Kentucky sued the company in January, alleging that the platform ” preyed on children and led them to self-harm.”
CEO Colin Adams said in a statement that the court-supervised sale “provides our company with the best opportunity to maximize value for all stakeholders.”
Prior to filing, Character.ai entered into the following agreement: disney It will act as a competitive bidder to license some of the company’s intellectual property for $20 million and provide transition services through former employees hired by the media giant.
In 2024, google has signed a non-exclusive license agreement for the startup’s large-scale language modeling technology and rehired former employees, co-founders Noam Shazier and Daniel de Freitas. The deal also included additional funding for the startup to continue growing.
Shazeer joined the company in June after leaving Google. OpenAI.
Character.ai plans to continue operating the platform with minimal disruption throughout the sales process, according to a statement, but added that the platform may eventually be “scaled back.”
