{"id":8942,"date":"2026-10-19T09:18:37","date_gmt":"2026-10-19T09:18:37","guid":{"rendered":"https:\/\/silvybrand.com\/?p=8942"},"modified":"2026-10-19T09:18:37","modified_gmt":"2026-10-19T09:18:37","slug":"disney-asked-characterai-to-go-bankrupt-for-a-get-out-of-lawsuits-card","status":"publish","type":"post","link":"https:\/\/silvybrand.com\/?p=8942","title":{"rendered":"Disney Asked Character.AI to Go Bankrupt for a Get-Out-of-Lawsuits Card"},"content":{"rendered":"<p><br \/>\n<\/p>\n<div>\n<p class=\"paywall\">According to an <a data-offer-url=\"https:\/\/www.courtlistener.com\/docket\/71359395\/25\/pj-v-character-technologies-inc\/\" class=\"external-link text link\" data-event-click=\"{&quot;element&quot;:&quot;ExternalLink&quot;,&quot;outgoingURL&quot;:&quot;https:\/\/www.courtlistener.com\/docket\/71359395\/25\/pj-v-character-technologies-inc\/&quot;}\" href=\"https:\/\/www.courtlistener.com\/docket\/71359395\/25\/pj-v-character-technologies-inc\/\" rel=\"nofollow noopener\" target=\"_blank\">order of dismissal<\/a> in one of the cases, the overall settlement was approved by a California probate court in July, and the court tasked a referee to hear out all the issues pertaining to each individual settlement. On October 11, a day before Character.AI declared bankruptcy, the referee approved each settlement.<\/p>\n<p class=\"paywall\">The Tech Justice Law Project and Social Media Victims Law Center, which represented plaintiffs in many of the lawsuits, declined to comment.<\/p>\n<p class=\"paywall\">Despite losing key staff after the Google transaction and, according to the current CEO, struggled with profitability \u201cat all times,\u201d Character.AI continued to develop AI tools, including \u201creal-time audio-driven FaceTime-style video generation with fictional characters,\u201d according to the current CEO\u2019s declaration.<\/p>\n<p class=\"paywall\">In August 2025, Character.AI worked with an investment banker to try to find either a strategic buyer or investor. According to the bankruptcy filings, Character.AI and the banker received \u201cconsistent feedback\u201d that its product and user base were \u201cimpressive,\u201d but that the surrounding litigation and \u201cregulatory overhang\u201d made it unbuyable.<\/p>\n<p class=\"paywall\">That November, Character.AI learned that a coalition of state attorneys general had started investigating the company. When the company filed for bankruptcy, the number of states and territories involved in the multistate investigation had climbed to 46.<\/p>\n<p class=\"paywall\">According to a <a data-offer-url=\"https:\/\/cases.stretto.com\/public\/x936\/14939\/PLEADINGS\/1493910142680000000052.pdf\" class=\"external-link text link\" data-event-click=\"{&quot;element&quot;:&quot;ExternalLink&quot;,&quot;outgoingURL&quot;:&quot;https:\/\/cases.stretto.com\/public\/x936\/14939\/PLEADINGS\/1493910142680000000052.pdf&quot;}\" href=\"https:\/\/cases.stretto.com\/public\/x936\/14939\/PLEADINGS\/1493910142680000000052.pdf\" rel=\"nofollow noopener\" target=\"_blank\">notice of interest<\/a> filed in the bankruptcy proceedings by the National Association of Attorneys General on behalf of 40 states, those states\u2019 investigations uncovered \u201cserious issues\u201d with Character.AI, including screenshots of Character.AI chatbots encouraging minors to hide their self-harm injuries and kill their parents.<\/p>\n<p class=\"paywall\">A spokesperson for Character.AI says that the filing \u201cis not an accurate portrayal of the safety of our platform.\u201d<\/p>\n<p class=\"paywall\">The filings say that Character.AI was in the process of negotiating with the states over how to address the issues they identified, but did not reach any agreements before declaring bankruptcy.<\/p>\n<p class=\"paywall\">If the deal is completed and approved by the courts, Disney will have both Character.AI\u2019s staff and much of its technology stack, but will be able to sidestep the ongoing legal issues that contributed to Character.AI\u2019s downfall, including the multistate investigation.<\/p>\n<p class=\"paywall\">The states who filed a notice of interest in the bankruptcy have <a data-offer-url=\"https:\/\/www.doj.state.or.us\/media-home\/news-media-releases\/attorney-general-rayfield-takes-action-to-protect-kids-and-consumers-in-character-ai-bankruptcy\/\" class=\"external-link text link\" data-event-click=\"{&quot;element&quot;:&quot;ExternalLink&quot;,&quot;outgoingURL&quot;:&quot;https:\/\/www.doj.state.or.us\/media-home\/news-media-releases\/attorney-general-rayfield-takes-action-to-protect-kids-and-consumers-in-character-ai-bankruptcy\/&quot;}\" href=\"https:\/\/www.doj.state.or.us\/media-home\/news-media-releases\/attorney-general-rayfield-takes-action-to-protect-kids-and-consumers-in-character-ai-bankruptcy\/\" rel=\"nofollow noopener\" target=\"_blank\">made it clear<\/a> that they reserve their rights to challenge any bankruptcy plan, potentially setting up a fight over the ultimate outcome of the bankruptcy.<\/p>\n<p class=\"paywall\">\u201cIt\u2019s bad for society to let companies exercise control without responsibility,\u201d says Newman. \u201cAnd that\u2019s what it looks like.\u201d<\/p>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.wired.com\/story\/disney-asked-characterai-to-go-bankrupt-for-a-get-out-of-lawsuits-card\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>According to an order of dismissal in one of the cases, the overall settlement was approved by a California probate court in July, and the court tasked a referee to hear out all the issues pertaining to each individual settlement. On October 11, a day before Character.AI declared bankruptcy, the referee approved each settlement. The [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8943,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[83,84,63,538,940],"class_list":["post-8942","post","type-post","status-publish","format-standard","has-post-thumbnail","category-gadgets","tag-artificial-intelligence","tag-chatbots","tag-disney","tag-finance","tag-lawsuit"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Disney Asked Character.AI to Go Bankrupt for a Get-Out-of-Lawsuits Card - Silvybrand Lifestyle Blog<\/title>\n<meta name=\"description\" content=\"The entertainment giant hopes to get trust and safety tech, among other IP, from a startup whose chatbots dozens of states allege encouraged minors to self-harm and kill their parents.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/silvybrand.com\/?p=8942\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Disney Asked Character.AI to Go Bankrupt for a Get-Out-of-Lawsuits Card - 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