A Couple Elephants in the Character.AI Bankruptcy Room

Ummm...

Character.AI said on Monday it had filed for Chapter 11 bankruptcy in the US ​and agreed to sell some of its assets ‌to Walt Disney for $20 million.

I get that this is more of a bullet-point recap of the filing, but it contains some reporting context and yet somehow, someway this report leaves out two pretty important facts:

1) In August 2024, Google paid $2.7 billion – yes, with a 'B' – to "hackquire" this company. It was one of the first such deals and by far the largest at the time.

2) In September 2026 – just last month – Disney hired Character's CEO, Karandeep Anand, to be their first CTO. He started just 10 days ago and brought a lot of his technical team with him...

Those seem like two pretty key details you may want to mention in your story about such a bankruptcy and asset sale. They even a quote from the current CEO talking about the sale, without noting that he hasn't even been CEO for a month.

Anyway, the writing was clearly on the wall for Character at that point, the bigger point remains what a disaster these "hackquisitions" are turning out to be. I pointed this out last June on the news that Noam Shazeer was leaving Google (again) for OpenAI. This seemed crazy because hiring him was the main reason for the $2.7B Character deal! Google paid all that money for less than two years of service for Shazeer.

Sorry, they also technically paid for the "non-exclusive licensing rights" to Character.AI, but as we're learning today, those are effectively worthless. And they're worthless, in part, because Google gutted the company with their deal, taking not only Shazeer, but several of his top people as well.

Even worse, the company left behind quickly descending into a chaos of lawsuits around AI safety, after several self harm incidents and at least two suicides linked to the service. It's probably not fair to say the hackquisition caused such situations, as there were issues before that deal, but it could not have helped the company not to have their best people – and founders – around to take on the task.

Just a complete and total fail of a deal. Now Disney seems to be getting one on the cheap with their CTO, Character's old CEO, getting some actual IP – not just the "non-exclusive" rights – in a fire sale.

One more thing: Some may also recall that Disney sent Character.ai a cease-and-desist in 2025 over infringing their copyrights...