Character.ai will shut down if no buyer emerges, capping a fall from $2.7 billion Google deal to bankruptcy

AI chat platform Character.ai has filed for bankruptcy and is up for sale. The deal should close by early December 2026. No buyer means the service shuts down. The platform and subscriptions keep running until then. Character.ai blames lawsuits over harm to children, regulatory pressure, and operational problems. One teenager took his own life.

Disney is picking up some assets for $20 million, including a perpetual, non-exclusive technology license. Former Character.ai employees who moved to Disney last month with ex-CEO Karandeep Singh Anand will help manage the transition.

Google closed a $2.7 billion deal in 2024 partly to bring back co-founder Noam Shazeer, who co-authored Google’s Transformer paper, the foundation of every major AI model. He and co-founder Daniel De Freitas were supposed to improve Google’s reasoning models. By 2026, Shazeer had already left for OpenAI, reportedly over Google’s compute bureaucracy, according to the Wall Street Journal.

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