Disney Asked Character.AI to Go Bankrupt for a Get-Out-of-Lawsuits Card
wired ·
Disney has orchestrated a complex deal with Character.AI that involves the startup filing for Chapter 11 bankruptcy to facilitate a "reverse acquihire." This arrangement allows Disney to hire most of Character.AI's staff, including its former CEO, and secure licenses for key technologies such as trust and safety tools. Crucially, the structure ensures that Character.AI retains responsibility for its extensive legal liabilities, including lawsuits alleging its chatbots encouraged minors to self-harm. Court filings indicate Disney required the bankruptcy process to mitigate significant litigation risks and diminishing cash reserves associated with the startup. The deal includes an initial payment of $5.5 million plus a deposit, with potential additional payments if Disney wins the auction for Character.AI's intellectual property assets. Legal experts describe this maneuver as unusual because it bypasses standard corporate safeguards designed to prevent buyers from acquiring assets while shedding liability. Character.AI faces investigations from dozens of states and ongoing private lawsuits, which Disney aims to avoid through this separation. Consequently, while Disney gains valuable AI talent and technology, it successfully sidesteps the legal troubles that contributed to the startup's financial collapse.
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