Krafton fights earnout lawsuit, says studio ex-heads quit on Subnautica 2

Krafton CEO Kim Chang-han testified Tuesday that the former executives of Unknown Worlds were dismissed because they had effectively stopped working on Subnautica 2, the highly anticipated sequel to the hit underwater survival game.

Speaking on the second day of the trial at Delaware Chancery Court, Kim said Krafton discovered in May that Charles Cleveland and Max McGuire — former design and technical directors at Unknown Worlds — were no longer participating in development.

“We asked them to return to their posts as game developer, design director and technical director,” Kim said. “But they refused. So we had no choice but to take operational control back from them.”

Krafton acquired Unknown Worlds — the creators of the Subnautica and Natural Selection franchises — for $750 million in 2021, including $500 million in upfront payment and a potential $250 million earnout tied to performance milestones.

Cleveland and McGuire filed suit in July, accusing Krafton of deliberately delaying the early-access release of Subnautica 2 to avoid paying the earnout. The early-access launch was pushed to next year. Krafton denies the allegation, saying the delay is solely to improve game quality.

“It is unrelated to the earnout,” Kim said. “The earnout terms are fixed in the agreement. But during the interim, they were not doing their work. When we asked them to return to their roles, we even said we would extend the earnout period if they did. But they declined.”

Testimony from day one of the trial underscored the former executives’ limited involvement. According to transcripts, Ted Gill, former CEO of Unknown Worlds, said Cleveland and McGuire had “no role” in the development of Subnautica 2.

Evidence presented in court included an email Cleveland sent to his family in July 2023 stating he had reduced his hours to one-quarter time and was “no longer making video games.” McGuire reportedly testified that he never led development of Subnautica 2 and therefore could not “rededicate himself” to a project he was not working on.

The court also reviewed a personal note written by Cleveland that read: “Don’t just go for the earn-out — go for $1 billion in emotional distress and damage. This is the mindset we need to have. Nuclear.”

Krafton maintains the dispute is fundamentally about accountability, not compensation.

“This trial is about ensuring the best possible experience for our players,” the company said in a statement. “We were forced to make a change when the former leaders showed little interest in developing Subnautica 2, which has always been our top priority.”

Krafton argued that the plaintiffs are now asking to be reinstated to roles they openly abandoned.

“They are asking to be restored to jobs they were not doing, said they had no interest in doing, and previously declined to return to,” the company said. “We look forward to presenting our evidence and are confident we will prevail so we can continue our strong progress on Subnautica 2.”