Character.ai, a California AI startup, filed for Chapter 11 bankruptcy amid lawsuits alleging its chatbots harmed teens' mental health and raised copyright issues. The company, valued at $1 billion in 2023, had removed chatbots impersonating Disney characters such as Elsa and Darth Vader after a cease-and-desist letter. Before the filing, it agreed that Disney would pay $20 million to license certain intellectual property. A court-supervised sale is planned by the end of this year, and if no suitable bid emerges, the platform will be wound down. Character.ai and Google also agreed earlier this year to settle several family lawsuits.
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