A Delaware Chancery Court judge ruled on March 16 that Krafton breached its acquisition agreement with Unknown Worlds Entertainment, ordering the South Korean publisher to reinstate CEO Ted Gill with full control of the studio and Subnautica 2's development.
The judge found that Krafton breached the equity purchase agreement by terminating Gill and co-founders Charlie Cleveland and Max McGuire without valid cause and improperly seizing operational control. The court declared the July 1, 2025 board resolution that removed the three executives "ineffective" on matters of operational control.
At the heart of this dispute lies a $250 million performance bonus. Krafton acquired Unknown Worlds in 2021 for $500 million with an additional $250 million earnout tied to sales goals if met by the end of 2025. Financial projections predicted a successful August 2025 early access launch would generate over 1.67 million copies sold by Q4 2025, with base-case and best-case scenarios indicating earnout payments of $191.8 million and $242.2 million respectively.
According to the judge's findings, Krafton CEO Changhan Kim began seeking ways to avoid the earnout after May 2025, leading to a month-long plan called "Project X" which included consulting ChatGPT multiple times. When Maria Park, Krafton's head of corporate development, told Kim that firing the founders without cause would likely lead to a lawsuit, Kim turned to ChatGPT for help; the AI responded that canceling the earnout would be "difficult".
The publisher initially claimed Gill and the others were terminated for failing to ready Subnautica 2 for timely release. It later switched to alleging the executives had abandoned their roles and attempted to steal confidential information. The court rejected both claims, finding Krafton's "newly manufactured justifications for the terminations are pretextual". The judge noted that Cleveland and McGuire had taken on limited roles but that was long known to and accepted by Krafton, and that the founders were acting to protect the studio's work product amid Krafton's takeover attempt.
Krafton must immediately restore Gill's access to the Steam platform and is not allowed to impede his authority over the early access launch of Subnautica 2. The judge extended the bonus eligibility period to September 15, 2026, and noted the co-founders have a contractual right to further extend this to March 15, 2027.
The case highlights genuine tensions in acquisition agreements with significant performance-based payouts. When a founder-led studio dramatically changes leadership post-acquisition, legitimate questions arise about the original contract's intent. Yet the court found that Cleveland and McGuire's limited roles were "long known to and accepted by Krafton", suggesting these conditions were either explicitly negotiated or implicitly tolerated by the publisher during the acquisition period.
For Krafton, the ruling represents a substantial setback. The publisher is "evaluating its options," according to statements made to media. Additional litigation remains pending regarding damages and whether Kraft should have approved the 2025 early access launch. Subnautica 2 has been pushed to 2026 with no set release date. The reinstatement decision does not automatically resolve the underlying question of game readiness; it instead restores to Gill the authority to make that determination himself.
What emerges from the court's analysis is a stark picture of a publisher's attempt to engineer around its contractual obligations by manufacturing grounds for termination. Whether the game was genuinely unready for 2025 release or whether the earnout mechanics created perverse incentives for delay may remain a point of contention, but the court has now placed control back in the hands of the creators. The judge's extension of the bonus window through 2026 gives the team a genuine second chance to hit the revenue targets that will determine whether Krafton pays the full amount due.