Following chatbot startup Character.AI’s bankruptcy filing earlier this week, entertainment giant Disney has agreed to extend job offers to the majority of the artificial intelligence firm’s staff. The move follows the recent appointment of Character.AI’s former chief executive officer, Karandeep Anand, who took on the role of Disney’s first chief technology officer.

Details of the Stalking Horse Agreement

According to details revealed in a legal filing, Disney has committed to offering employment to at least 60 Character.AI workers. That figure represents the majority of the startup’s workforce. The legal document indicates that Disney would pay these employees an estimated $60 million in annual compensation. Furthermore, the filing notes that the vast majority of Character.AI employees who received employment offers from Disney have already accepted them.

The arrangement is structured as a stalking horse bid, which leaves open the possibility that a competing entity could still emerge with a higher offer during the bankruptcy process. Previously, Character.AI disclosed that Disney had agreed to acquire select assets from the startup in a transaction valued at $20 million.

Operational Costs and Mounting Legal Pressures

Character.AI’s legal filing outlines the structural and financial pressures that led to its bankruptcy. Despite maintaining what the company described as a large and engaged user base, the startup was severely impacted by elevated operational costs alongside potential litigation-related liabilities and active regulatory scrutiny.

Among the startup’s critical legal challenges is a lawsuit filed by the mother of a 14-year-old boy. The lawsuit alleges that her son developed an obsession with one of Character.AI’s conversational chatbots before committing suicide. In addition to civil litigation, the startup has been subject to government investigations addressing concerns surrounding child safety practices on its platform.