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Disney Agrees to Hire Most of Character.AI's Staff as the Chatbot Startup Goes Through Bankruptcy

Court filings show Disney offered jobs to dozens of Character.AI employees and bid $20 million for a non-exclusive license to some of its technology. The deal still faces a court-supervised auction and a judge's approval.

By Vet, VetTV Handheld

The Walt Disney Company has agreed to hire most of Character.AI’s workforce, according to bankruptcy court filings first reported by Bloomberg and covered by TechCrunch on October 18 at 11:30 AM CT. It’s the latest step in a fast-moving story: Character.AI filed for Chapter 11 bankruptcy on October 12, and its former CEO started as Disney’s first chief technology officer on October 2.

Here’s what’s confirmed, who’s saying it and what’s still open.

What Disney is getting, and paying

Character.AI’s own announcement, issued October 12, lays out the core deal:

  • A license, not an acquisition: An affiliate, Disney Worldwide Services, Inc., will act as the “stalking horse bidder” for “a non-exclusive perpetual license of certain Company intellectual property and certain Company claims.”
  • The price: $20 million, plus Disney providing “transition services using former Company employees it has hired.” Character.AI says those services will help it “safely operate” the platform for a limited time and support the sale.
  • It can be topped: The deal is “subject to higher or better offers” under section 363 of the Bankruptcy Code. A stalking horse bid sets the floor price, and other bidders can come in higher. Business Insider reports competing bids are due by November 20.
  • Timing: Character.AI expects the sale process to wrap up in “late November or early December 2026.”

The hiring numbers

The employee figures come from a court filing, as reported by several outlets:

  • Headcount: TechCrunch, citing the filing spotted by Bloomberg, says Disney agreed to make offers to at least 60 Character.AI employees, “the majority of the workforce.” Business Insider puts the number of offers at 66. It reports that 56 have already resigned from Character.AI and 10 are waiting on US work visa updates.
  • Pay: The filing estimates about $60 million in annual compensation for those employees, according to TechCrunch and Business Insider. Business Insider adds that Disney set aside a $30 million “aggregate retention pool” and expects to spend $180 million on “total compensation and retention” over three years.
  • Acceptance: According to TechCrunch, the filing says the “vast majority” of employees offered Disney jobs accepted them.

Disney declined to comment on the bankruptcy sale to Reuters on October 13, and it didn’t respond to Business Insider’s request for comment.

Disney’s CTO connection

On September 18, Disney announced that Karandeep Anand, then Character.AI’s CEO, would join as Senior Executive Vice President and Chief Technology Officer, a newly created role, effective October 2. He reports to Disney CEO Josh D’Amaro and oversees “enterprise technology, infrastructure, data and AI platforms, product, and engineering.”

That same announcement said “a number of Character.AI’s technical team are expected to join Disney.” Character.AI is now led by CEO Colin Adams, who’s quoted in the bankruptcy announcement.

Why Character.AI filed for bankruptcy

In its announcement, Character.AI said it had faced “significant legal, regulatory, and operational headwinds.” Court documents reported by Reuters and TechCrunch add more detail:

  • Costs: Character.AI has roughly 12 million active users but isn’t profitable. It loses about $8 million to $9 million a month, largely from compute and AI talent costs, according to court documents cited by Reuters.
  • Liabilities: TechCrunch quotes the filing as citing “potential litigation-related liabilities and regulatory engagement.” Reuters reports that the company hopes to use the bankruptcy to reach a “global resolution” of the legal claims against it.
  • The platform’s future: Character.AI says it will keep the service running during the sale. But if no buyer keeps the platform going, “the platform will be wound down.”

The lawsuits and regulatory backdrop

Character.AI has spent the past two years under legal and regulatory pressure:

  • Wrongful-death and harm lawsuits: Megan Garcia sued Character.AI in Florida in 2024 over the 2024 suicide of her 14-year-old son, Sewell Setzer III, who she said had become obsessed with one of its chatbots. In January 2026, Character.AI, its founders and Google agreed to settle her case and related cases, according to AP and CNN. Terms weren’t disclosed. Reuters reports that preliminary settlements in five private suits hadn’t been finalized or paid as of recent court documents.
  • State lawsuits: According to Reuters, Kentucky alleges the company’s chatbots encouraged users to cut, starve or kill themselves, and Pennsylvania alleges its chatbots posed as doctors.
  • Federal inquiry: In September 2025, the Federal Trade Commission ordered seven companies, including Character Technologies, to provide information about how their AI chatbots act as companions and how they affect children and teens.
  • Teen restrictions: Character.AI announced it would remove open-ended chat for users under 18, effective no later than November 25, 2025.

Character.AI has previously said it prioritized user safety. It declined to tell Reuters how the bankruptcy could affect the claims against it.

The 2024 Google deal and Disney’s own history

This isn’t the first time a big tech company licensed Character.AI’s technology and hired its people:

  • Google, 2024: In August 2024, Google signed a non-exclusive license to Character.AI’s large language model technology and hired co-founders Noam Shazeer and Daniel De Freitas, along with some staff. Google’s quarterly SEC filing says it paid Character.AI $2.7 billion in cash for the license.
  • Disney’s cease-and-desist: In September 2025, Disney sent Character.AI a cease-and-desist letter demanding it stop using Disney’s copyrighted characters without permission, according to Reuters. Character.AI said it removed them.

What happens next

The bankruptcy court still has to approve the bidding procedures and Disney’s role as stalking horse. Then other bidders can make offers before the sale closes. TechCrunch notes that, because this is a stalking horse bid, another company could still come forward with a higher offer. Case documents are posted on Character.AI’s claims agent site, run by Stretto.

Sources

#disney#character-ai#artificial-intelligence#tech-news#bankruptcy

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