# Disney hires most of Character.AI's staff in deal tied to its bankruptcy

published: 2026-10-19T16:05:34.488Z
topic: funding
source: https://arstechnica.com/tech-policy/2026/10/disney-found-a-way-to-buy-character-ai-without-buying-its-lawsuits/
url: https://aiagentnews.io/stories/disney-hires-most-of-character-ai-s-staff-in-deal-tied-to-its-bankruptcy

Character.AI filed for Chapter 11 bankruptcy on October 12 as part of a deal that lets Disney hire most of its staff and bid for a license to much of its technology. The structure is designed to leave the startup's lawsuits and regulatory investigations with whatever remains of the company.

Court filings show that Disney paid Character.AI $5.5 million in September, along with a refundable $2 million good faith deposit, and hired the majority of its employees, including former CEO Karandeep Anand. Disney also agreed that some of those hires would help keep Character.AI operational for five months.

Through the bankruptcy, Disney hopes to obtain a perpetual, worldwide, nonexclusive license to a wide range of Character.AI code, documentation, frameworks and tools, including trust and safety moderation, training infrastructure and age-prediction technology. User data and the website are not on the list. The license will be auctioned, and if Disney wins, it has agreed to pay an additional $12.5 million as a closing payment, subject to court approval.

The company faces a multistate investigation involving 46 states and territories, along with personal injury claims over its chatbots. The states have reserved the right to challenge any bankruptcy plan, and legal experts quoted by WIRED question whether corporate law safeguards were designed for a deal structured this way.

## Why it matters if you build agents

Teams that depend on Character.AI's platform should watch how its technology and staff are divided, since a license auction could change who maintains the code. The structure also shows that liabilities can stay with a company even when its technology is licensed away, which matters when assessing vendor risk.