Character.ai's User Chats Are Up for Sale for $10 Million — to a Company Created the Day Before
Photo: Hippopx (public domain). Illustrative image.
What happened. The bankrupt company behind Character.ai has picked a buyer for everything Disney did not want. Character Technologies Inc. named Smirks and Pangs Acquisition LLC as the additional “stalking horse” bidder for the Character.ai platform on Saturday 14 November 2026, in a notice filed in the US Bankruptcy Court for the District of Delaware (Docket No. 164). The price: $10 million in cash, plus the assumption of certain liabilities — including $2,684,462 in cure costs across seven of 55 contracts — with a 3.5% termination payment of $350,000. Objections are due by 9 p.m. Eastern on Wednesday 18 November, and the $10 million becomes the floor rival bids must beat at the auction on 1 December.
What the $10 million buys. The schedule filed with the notice lists the Character.ai website and apps, all AI models and weights — trained or untrained, finished and unfinished — user account information and chat content, advertising and analytics data, the brand, nine patents and domains including character.ai and c.ai. It also transfers the compliance records behind the platform’s privacy promises: user and parental consents, ad opt-outs, age-assurance status and data-subject requests. The schedule transfers the records; it does not say whether the buyer must honour them.
The buyer is the mystery. Smirks and Pangs Acquisition LLC was formed in Delaware on 13 November 2026 — one day before it was selected — under file number 10840241. The state’s public record lists no members, managers or parent company, and the bankruptcy notice adds only that the buyer has no connection to the debtor other than the agreement itself. A newly formed company bidding in a bankruptcy sale is often a vehicle set up for the transaction by an existing investor or business, but neither the court filing nor the state record says whether that is so here, or who is behind it.
Why this half of the estate matters. Disney’s separate $20 million deal licensed code and nine patents but deliberately excluded the user data and finished models — the parts state attorneys general have tried to protect, because they hold people’s conversations. This sale is the other half: the app, the models and the data. At about 163 million current and past users and 12 million monthly actives, the cash price works out to roughly six cents per user. The question now is not just who outbids $10 million, but what the buyer does with the chats — and whether the consent and opt-out records that travel with them are treated as obligations or as paperwork. Nonprofits sued the frontier labs this week over AI safety, and the Character.ai sale is the same argument in commercial form: who owns the data an AI was built on, and what happens to it when the company fails.
Sources
- PPC Land — “Character.ai users’ chats face a $10m sale to Smirks and Pangs” (15 November 2026, reporting the bankruptcy-court notice, Docket No. 164): https://ppc.land/character-ai-users-chats-face-a-10m-sale-to-smirks-and-pangs/
- FreshSynapse — “Nonprofits Sue OpenAI, Anthropic, Google, Meta and SpaceX to Freeze Frontier AI”: https://freshsynapse.com/articles/nonprofits-sue-frontier-ai-labs-2026-11-13/
- FreshSynapse — “AI Chatbots Are Sending Shoppers to Risky Sites”: https://freshsynapse.com/articles/ai-chatbots-risky-shopping-sites-2026-11-13/
- FreshSynapse — “What Is an AI Agent? A Plain-English Guide to How AI Agents Work”: https://freshsynapse.com/articles/what-is-an-ai-agent/
