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KRAFTON Acquisition and Controversy
February 17, 2026 at 02:25 AM
Major expansion with court details, Project X specifics, ChatGPT dates, file theft counterclaim, CFO testimony
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 conflict involves a $500 million acquisition, a $250 million earnout provision, the firing and alleged theft of 170,000 files, a secret task force called "Project X," ChatGPT being used to brainstorm earnout avoidance, and a trial in Delaware Chancery Court.
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, with an earnout provision of up to $250 million contingent on Subnautica 2 hitting specific revenue targets by June 2026.
Months before the deal, Perfect World Co., Ltd. had sold its partial ownership shares to the founders at a $50 million valuation. The tenfold gap between Perfect World's price and KRAFTON's illustrates how rapidly Subnautica's commercial success had inflated the studio's value.
KRAFTON is a South Korean company (founded 2007 as Bluehole, rebranded 2018) best known for PUBG: Battlegrounds. It went public on the Korea Exchange in August 2021 with a $3.8 billion IPO, South Korea's largest in a decade. CEO Changhan Kim, who holds a Ph.D. in Computer Science from KAIST, led the Unknown Worlds acquisition using IPO proceeds.
On July 2, 2025, KRAFTON replaced three members of Unknown Worlds' leadership "effective immediately": Charlie Cleveland (co-founder), Max McGuire (co-founder/CTO), and Ted Gill (CEO). Steve Papoutsis was installed as the new CEO.
Papoutsis had previously served as CEO of Striking Distance Studios (The Callisto Protocol, a KRAFTON subsidiary) and before that spent 13 years at EA/Visceral Games, where he produced the Dead Space franchise.
The lawsuit was filed on July 10, 2025 by Fortis Advisors, LLC (representing the former shareholders) against Krafton, Inc. The case number is 2025-0805-LWW, assigned to Vice Chancellor Lori W. Will in the Court of Chancery of the State of Delaware.
The plaintiffs allege that KRAFTON deliberately delayed Subnautica 2's release to avoid paying the $250 million earnout. An internal creative director had recommended an August 2025 Early Access launch. In May 2025, the earnout was forecast at $191 million (base case).
Court filings allege CEO Changhan Kim established a secret internal task force called "Project X" with two stated objectives: negotiate a "Deal" with the founders to reduce the earnout, or execute a "Take over" of Unknown Worlds if negotiation failed. The filings suggest the takeover route was deemed "easier."
Kim allegedly viewed the earnout as "a threat to Kim's job" because his 2026 contract renewal was approaching. He expressed concern that paying the earnout would cause "the value of the studio" to "drop significantly." Slack messages between Kim and KRAFTON CFO Richard Yoon discussed takeover prospects.
The pre-trial brief alleges Kim "turned to artificial intelligence to help him brainstorm ways to avoid paying the earnout." In a June 2, 2025 message to KRAFTON VP Maria Park, Kim included a ChatGPT link and wrote: "Now, ChatGPT [is] start[ing] to answer that it is difficult to cancel the earnout."
During trial testimony, Kim confirmed he "actually searched on ChatGPT to get faster answers." KRAFTON did not produce the ChatGPT conversation logs, stating they "no longer exist."
KRAFTON filed a countersuit accusing the founders of stealing confidential material. According to the filing, the three former leaders downloaded over 170,000 files between early June and July 2025. McGuire allegedly downloaded nearly 100,000 files (including hundreds related to another project called Moonbreaker). Cleveland downloaded approximately 72,000 files, eight minutes before his access was revoked. Gill exported his entire company email account twice, triggering IT alerts.
When confronted, KRAFTON claims the founders lied about the scope of their downloads. Gill told the company he was "backing up a few things" when he was actually running a two-day export of his entire Google Drive and email.
KRAFTON also accused the founders of "abandoning" Subnautica 2 and claimed the game "would be in development for 30 years" under their leadership. CEO Kim testified: "There wouldn't be any deal" if he'd known Cleveland wanted to stop making games.
A three-day trial was held November 17-19, 2025, producing an 891-page transcript. A post-trial argument occurred on January 9, 2026. During the trial, KRAFTON's CFO Richard Yoon "could not name a single Krafton employee who actually thought the game was unready" for Early Access.
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, Vice Chancellor Will has not issued a ruling.
The firing sparked community backlash. Reddit boycott posts reached 45,000+ upvotes on r/Subnautica. New CEO Papoutsis responded: "There have always been people that have come and gone." Despite the controversy, Subnautica 2 remains #1 on Steam's wishlist chart with an estimated 3.8 million wishlists.
