The dramatic dismissal of three senior developers at Subnautica 2 studio Unknown Worlds gets messier by the day. In a publicly filed lawsuit, the three fired heads of the studio have accused publishers Krafton of all sorts of dirty tactics, ploys, and shenanigans to purposefully delay the game until 2026, all in an intentional effort to avoid paying a maximum $250 million earnout bonus to the studio.
In one bizarre episode alleged in the lawsuit, Unknown Worlds co-founder Charlie Cleveland went to lunch with Krafton CEO, Kim Chang-han, who told him via translator that having to pay such an earnout would be “disastrous financially and hugely embarrassing” for the publisher.
“On May 20, 2025, Cleveland joined Kim (Krafton’s CEO) and some colleagues for lunch,” a section of the lawsuit reads. “Kim said that if Unknown Worlds released the game on its planned timeline (meaning Krafton would have to pay the earnout), it could be disastrous financially and hugely embarrassing for Krafton.
“Krafton later asserted that Kim never made those statements,” the lawsuit continues. “Instead, Krafton claimed Kim’s words had been incorrectly interpreted by the translators…” We have asked Krafton to clarify what Kim really said, if that is the case, but judging by all our other ignored questions I doubt we’ll get a satisfactory answer.
The lunch took place at the height of an incredibly tense standoff between studio and publisher, just weeks before Cleveland was sacked along with fellow co-founder Max MacGuire and CEO Ted Gill.
Krafton accused the trio of abandoning their duties on the game, giving this as the reason for their dismissal. But the lawsuit filed by Cleveland and co alleges that the publisher really shitcanned them to avoid paying the substantial earnout.
To give you some background, this bonus would only be gained if Unknown Worlds hit certain targets by the end of 2025. Most of it would have been paid to the three men, with 10% set aside for 40 other employees at the studio. “Beyond this guarantee,” the lawsuit says, “the Founders planned to share even more of the earnout with their dedicated team”.
With that much money on the line, a disagreement emerged between the leadership trio at Unknown Worlds, and the suits at Krafton. Cleveland and co wanted the game released – it would earn the studio (and themselves) that chunky bonus. Krafton wanted the game delayed – it would save them millions of dollars and (according to Cleveland at least) some embarrassment. From this point on, the trio allege, Krafton engaged in “desperate efforts” to delay the game and therefore avoid paying the earnout.
“Krafton engaged in a months-long campaign to delay Subnautica 2’s release,” says the legal doc, posted on social media by Cleveland and reported by Aftermath. “It pulled key marketing materials, refused to follow through with crucial partnerships, and reneged on long-standing commitments to handle important pre-launch tasks. Multiple Krafton employees themselves suggested that these moves were for the purpose of frustrating the earnout, despite the earnout agreement’s prohibition on taking actions for that purpose.”
The lawsuit accuses Krafton of turning to all sorts of dirty tactics in an attempt to frustrate the game’s impending release in that unspecified month of 2025. For example, Krafton allegedly:
- Assigned an entirely new publishing team to the game, headed by an employee who didn’t speak English. That team “delayed decisions and delivered incomplete work”
- Issued an “internal stop work order” and “told all Krafton teams to stop all creative tasks related to Subnautica 2”
- Ordered all US employees of Krafton previously in touch with Unknown Worlds to stop communicating with the studio
- Cancelled work on trailers, advertising, and even a front page plan for PC Gamer magazine.
- Cancelled localisation plans to translate the game to nine languages
- Neglected to write up the terms of service agreements necessary for the game
- Held a milestone meeting in May, and demanded that the game be delayed (this is possibly the meeting in which this “leaked” document was shown)
In another wild story, the lawsuit says that Krafton’s own US-based team in El Segundo, California, warned one of the three ill-fated managers about Krafton’s plans, saying the publisher had people “combing” through agreements looking for a loophole which would allow them to fire the three key managers.
“Upon their return [from a business trip to Korea], the El Segundo team—Krafton employees—reported to [Ted] Gill that Krafton’s leadership was not focused on a successful launch, but instead on how it could convince Unknown Worlds to delay the game.
“The El Segundo colleagues informed Gill that Krafton’s legal team was combing through the agreements looking for any opening to terminate the Founders if they proceeded with the planned release. The El Segundo colleagues told Gill it was clear that Krafton was aiming to avoid paying the earnout.”
As these obstruction efforts intensified, the trio allege that publishing chiefs at Krafton met with them and offered a lower earnout. But the trio declined, claiming the amount was not “anything close to what they deserved, and did not allow them to share the earnout with the full team.”
Soon after, the three men received letters telling them they were fired. Steve Papoutsis, who was installed by Krafton to replace the three chiefs, allegedly said they were fired for their “intention to proceed with a premature release of Subnautica 2.”
“The letters make clear that the Founders were terminated without cause,” says the lawsuit, and this will likely be a key contention if the case does go to court without a settlement. Krafton have already said they terminated the three developers because those men were absent in their duties. Cleveland, for example, was accused of spending more time working on his nascent movie company than working on the subaquatic sequel. Although the trio are making counterarguments to this too.
In the lawsuit Cleveland suggests that Krafton’s own CEO Kim Chang-han (the same man who would later allegedly talk of “embarrassing” circumstances over lunch) personally encouraged Cleveland to “develop Subnautica’s ‘franchise IP’ with cross-media expansion beyond the game, into television or movies”. The lawsuit claims that all parties agreed this “would become Cleveland’s focus”.
The lawsuit also claims that Krafton gave the other two leadership members the go-ahead to take on broader roles that might, presumably, see them working a little less closely on the game and more on this “franchise IP” stuff.
As for other employees, the lawsuit claims that in the runup to Subnautica 2’s eventual release, “Gill was negotiating incentive bonuses for the many employees who were not guaranteed to receive earnout pay because they joined Unknown Worlds after Krafton’s acquisition.”
The entire lawsuit is quite an angry blast of accusations. It is worth noting that key parts of the lawsuit are redacted. Important figures, such as the exact projected sales numbers of Subnautica 2, and the number of sales of previous games, are blacked out. So are some terms of the employment contracts between Krafton and Cleveland, MacGuire, and Gill. The exact formula that would calculate their earnout is redacted too. It’s likely more of these details would come out if it reaches court without a settlement.
As part of the lawsuit’s demands, the trio want to be restored to their roles at Unknown Worlds, and to be paid “damages in the amount [they] would have received in earnout payments” had Krafton not fired them all, plus “out-of-pocket loss, damages, and expenses in an amount to be determined at trial.”
Meanwhile, Krafton do not seem to be backing down.
“While we are disappointed that Charlie, Max, and Ted have filed a lawsuit seeking a huge payout, we look forward to defending ourselves in court,” they told Aftermath in a statement. “[D]ecisions were made to ensure Subnautica 2 is the best possible game and lives up to fan expectations. Releasing the game prematurely with insufficient content, falling short of what fans expect in a sequel, would have both disappointed the players — who are at the heart of everything Krafton does — and damaged the reputations of both the Subnautica and Unknown Worlds brands.”
