Court filings show that artificial intelligence startup Character.AI owes nearly $7 million in combined amounts to Google and a group of Big Law firms, shedding some light on the financial strain behind the chatbot’s bankruptcy.
Character.AI, which lets users create personalized AI bots, filed for Chapter 11 bankruptcy protection in Delaware on Monday and plans to complete a court-supervised sale of the company by the end of the year.
The AI platform’s bankruptcy petition shows that it owes its 20 largest unsecured creditors more than $10.6 million, including over $4 million to Google and $2.6 million to a group of five prominent law firms.
Hogan Lovells was owed the largest amount among the law firms, at about $2.1 million. White & Case was listed as being owed about $189,000, while the firms Munger, Tolles & Olson; Skadden, Arps, Slate, Meagher & Flom; and Quinn Emanuel Urquhart & Sullivan were owed roughly $137,000, $126,000, and $64,000, respectively.
Representatives for Google and the law firms did not immediately respond to requests for comment.
The court filing does not detail the nature of the debts. However, Character.AI, founded by former Google researchers, named Google Cloud its preferred cloud infrastructure in 2023. The startup has also faced a wave of lawsuits alleging its chatbots harmed or encouraged harmful behavior among young users. Character.AI agreed to settle multiple lawsuits earlier this year.
The AI company’s bankruptcy filings suggest that those legal troubles were part of a broader financial squeeze.
Character.AI’s bankruptcy petition estimated assets worth $50 million to $100 million and estimated liabilities in the same range.
“The burgeoning and evolving field of AI entertainment, however, has proven to be costly to develop and grow,” a filing in the case reads. “These high costs, coupled with potential litigation related liabilities and regulatory engagement have contributed to the Debtor’s inability to generate sufficient cash flows to support its business in the present form.”
A Character.AI spokesperson told Business Insider that over the past year, the startup has “taken meaningful steps to sustain and improve our business amid significant legal, regulatory, and operational headwinds.”
