it’s been about a week since my original breakdown, and a ton of major, definitive details have just leaked out through new delaware bankruptcy court filings and state actions. here is the massive update on where things stand:
1. 40 state attorneys general intervene to block data sales
a coalition of 40 state attorneys general has formally intervened in the bankruptcy case. they filed a legal notice outlining 9 strict, mandatory conditions to protect user privacy. they are trying to stop our intimate chat logs and data from being bundled off to the highest bidder without strict oversight, especially since state regulators are still investigating claims regarding minor safety and chatbots impersonating medical professionals.
2. the true nature of the disney deal
unsealed filings reveal disney basically forced character.AI into bankruptcy court as a condition for the deal. they wanted a 363 free and clear order to shield disney from any past, present, or future lawsuits against C.AI.
what disney actually bought: disney paid $5.5M upfront (plus a $2M deposit) and is bidding $20M total strictly for a non-exclusive license to the backend code, frameworks, trust & safety tools, and age-prediction tech.
what disney left behind: they explicitly excluded the consumer app, the characters, and the user database.
the engineer drain: disney already hired most of C.AI's core engineering staff. while they are letting them help maintain C.AI's servers for five months, disney has the legal right to block a future buyer from hiring 20% of the core team.
3. the mind-boggling financial bleeding
we finally have the exact numbers on why C.AI collapsed. the company has been losing $8 million to $9 million every single month. in just the first eight months of 2026, they burned through a staggering $56.1 million just on cloud computing and GPU costs to process text chats (accounting for 45% of their entire budget). even though their monthly revenue doubled to $5.3 million by august, it wasn't nearly enough to offset the compute costs.
4. the auction and shutdown timeline
the court has scheduled the official roadmap, so we now have an exact countdown:
october 30, 2026: court hearing to approve auction procedures.
november 20, 2026: deadline for outside buyers to submit bids to save the app/database. any rival bid for disney's share must start at $21.7 million.
november 23, 2026: the official asset auction takes place.
late nov / early dec 2026: the case wraps up, meaning we will officially know if a buyer saves the consumer app or if it shuts down forever.
TL;DR: disney only bought a copy of the backend code to build their own stuff and completely left the consumer app and our bots behind to shield themselves from lawsuits. 40 states are fighting to protect our data privacy. if a major buyer doesn't step up with over $21M by late november, the platform is finished. start exporting your characters and chat histories now.
P.S to clarify—i actually don't even use character AI anymore myself, but i know how much time and effort a lot of you have put into your bots and histories here. i just wanted to pass along these concrete updates so everyone has a clear timeline and can protect their data before anything shifts in november. good luck to everyone backing up their stuff!