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

By Queenie Wong, Los Angeles Times Character.ai, a Silicon Valley 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 file