Disney structured its acquisition of Character.AI around the startup’s Chapter 11 bankruptcy, executing two linked transactions. In September it paid Character.AI $5.5 million plus a refundable $2 million good‑faith deposit and hired the majority of the company’s staff, including former CEO Karandeep Anand, while allowing some of those newly hired Disney employees to keep Character.AI operational for five months. After Character.AI filed for bankruptcy on 12 October, Disney sought through the proceedings a perpetual, worldwide, nonexclusive license to the bulk of Character.AI’s technology—its code, documentation, frameworks, tools, trust‑and‑safety moderation stack, training infrastructure and age‑prediction technology—excluding user data and the website itself. The license will be auctioned; if Disney wins the bid it must pay an additional $12.5 million closing payment, otherwise it receives the $2 million deposit back plus a breakup fee. To preserve competition, Disney agreed that the winning bidder may interview and potentially hire up to 80 % of the specific employees Disney already took on, with Disney selecting which individuals. A proposed “363 Free and Clear” court order would clarify that the deal is not a merger and that Character.AI remains liable for any outstanding legal claims, including the ongoing multistate investigation involving 46 states and territories that uncovered serious safety issues with the chatbots.