Disney found a way to buy Character.AI without buying its lawsuits

This week, Character.AI declared bankruptcy. While some saw the fall of a chatbot platform as a harbinger for the industry, court filings indicate that the decision was actually a key part of a deal that has let Disney hire most of Character.AI’s staff—including its now former CEO Karandeep Anand —potentially acquire most of Character.AI’s technology, and avoid the beleaguered startup’s many legal liabilities and obligations.

In the past few years, Character.AI has faced multiple private lawsuits over the safety of its chatbots, as well as investigations from regulators around the world. In a declaration filed as part of the bankruptcy, Character.AI’s newly appointed CEO explained that the goal of the bankruptcy was to reach a “consensual resolution” with personal injury claimants and a group of states investigating the company, while maximizing the value of the company’s assets for shareholders.

The Disney deal seems to be structured so that whatever is left of Character.AI will retain responsibility for those legal battles, …