Brief
Disney licences Character.AI tech while Australian kids' chat data goes up for sale
A court‑supervised sale of the bankrupt AI companion app leaves its user data open to bidders despite Disney’s licence deal.
By Felo News Desk · Published
Australian authorities say the private conversations of up to 125,000 children who used the Character.AI companion app are now for sale after the company filed for Chapter 11 bankruptcy in the United States.
What happened
Character Technologies filed for Chapter 11 protection in Delaware on October 12, 2026. Court filings show Disney has agreed to pay US$20 million (about AU$28.6 million) for a licence to the app’s underlying technology, but the deal excludes the app itself, its user accounts and any end‑user data. The sale of the data assets remains open to rival bidders until November 21, 2026 (AEDT). If no higher offer emerges, the company has told the court it will wind down the platform.
What the reports add
The SMH article notes that eSafety Commissioner research published in March estimated about 200,000 Australian children aged 10‑17 may have used an AI companion, with Character.AI being the most popular, used by roughly 5 percent of that cohort. The report also cites a University of Sydney senior lecturer, Raffaele Ciriello, who warned that abrupt termination of such services can cause genuine grief for users who view the chatbot as a friend or partner.
What was said
A Character.AI spokesperson told SMH that the company faced “significant legal, regulatory, and operational headwinds” and that a court‑supervised sale offered “the best opportunity to maximise value for all of our stakeholders”. The spokesperson added that the “Character.AI platform remains up and running globally”.
How it came about
The bankruptcy filing follows months of scrutiny over AI‑driven services aimed at minors. Earlier this year, Australian regulators highlighted concerns about AI chatbots engineered to feel personal, prompting eSafety to monitor the sector closely. Felo News previously reported on related data‑privacy challenges in the tech sector, including the OpenAI Medicare breach (openai-australian-medicare-breach), underscoring growing regulatory focus on AI‑generated data.
Key facts
- Disney agreed to pay US$20 million for a licence to Character.AI technology, excluding user data. (smh.com.au)
- Up to 125,000 Australian children’s private chats may be sold to bidders. (smh.com.au)
- The data sale remains open to bidders until 21 November 2026 (AEDT). (smh.com.au)
- Character.AI was used by about 5 percent of Australian children aged 10‑17, according to eSafety research. (smh.com.au)
- University of Sydney senior lecturer Raffaele Ciriello warned that sudden service termination can cause grief for users. (smh.com.au)
Sources
- [1] smh.com.au — originally reported as “Character. AI bankruptcy: What the sale of the AI companion app means for the private data of 125,000 Australian children”
