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KRAFTON Acquisition and Controversy
February 17, 2026 at 02:03 AM
Comprehensive account from court documents and press reporting
The development of Subnautica 2 has been overshadowed by a corporate dispute between Unknown Worlds Entertainment's original founders and their parent company KRAFTON, Inc. (the South Korean publisher of PUBG: Battlegrounds). The conflict involves a $500 million acquisition, a $250 million earnout provision, the firing of the studio's co-founders, and a lawsuit that went to trial in November 2025.
KRAFTON announced the acquisition of Unknown Worlds on October 29, 2021. The deal closed in December 2021. KRAFTON paid $500 million upfront for full ownership of the studio. The agreement also included an earnout provision of up to $250 million, contingent on meeting specific revenue targets tied to Subnautica 2 by 2025/2026.
Just months before the KRAFTON deal, Perfect World Co., Ltd. (which had held partial ownership) sold its shares to the founders at a valuation of $50 million. The ten-fold difference between Perfect World's $50 million valuation and KRAFTON's $500 million purchase price illustrates how rapidly Subnautica's commercial success had increased the studio's perceived value.
On July 2, 2025, KRAFTON replaced three members of Unknown Worlds' leadership "effective immediately": Charlie Cleveland (co-founder and director), Max McGuire (co-founder and CTO), and Ted Gill (CEO). Steve Papoutsis was installed as the new CEO.
Papoutsis had previously served as CEO of Striking Distance Studios (developer of The Callisto Protocol) and before that worked at EA's Visceral Games, where he was involved with the Dead Space franchise.
Cleveland, McGuire, and Gill filed a lawsuit against KRAFTON shortly after their removal. The plaintiffs allege that KRAFTON deliberately delayed Subnautica 2's release to avoid paying the $250 million earnout, which was tied to revenue targets with specific deadlines.
Among the allegations, the plaintiffs claim that KRAFTON internally codenamed the earnout avoidance plan "Project X." They also allege that KRAFTON CEO Changhan "CH" Kim used ChatGPT to brainstorm ways to avoid paying the earnout.
Cleveland publicly stated that Subnautica 2 was "ready for early access release" at the time of the firing, implying that any further delays were not due to the game's development state.
KRAFTON disputed the founders' claims and filed counter-accusations. The company accused the founders of "abandoning" Subnautica 2 and alleged they were stealing "what essentially amounts to a blueprint for Subnautica." KRAFTON also claimed that under the founders' leadership, the game "would be in development for 30 years."
KRAFTON CEO Changhan Kim testified in court that the company "would never have spent an initial $500 million on Unknown Worlds in 2021 had it known the leadership team would allegedly seek to abandon their posts."
In October 2025, internal milestone documents were leaked online. KRAFTON confirmed their authenticity. The documents revealed that the Early Access scope had been scaled back from the original plan: one chapter (8-10 hours) instead of two chapters (13-16 hours), two fewer biomes, the removal of custom game modes, and a shift from dedicated multiplayer servers to peer-to-peer networking.
The trial began in November 2025 in Delaware Chancery Court. The plaintiffs demand full reinstatement to their positions, payment of the full $250 million earnout, and additional damages for reputational harm and lost income. As of February 2026, no verdict or settlement has been publicly announced.
The firing sparked significant community backlash. Reddit posts calling for a boycott of Subnautica 2 went viral, with the top thread on r/Subnautica titled "DO NOT BUY SUBNAUTICA 2" reaching over 45,000 upvotes. Additional threads hit the front page with 30,000+ upvotes.
New CEO Steve Papoutsis responded to the boycott sentiment: "There have always been people that have come and gone." Despite the boycott calls, Subnautica 2's Steam wishlist numbers continued to climb, sitting at an estimated 3.8 million as of early 2026.
