Inside The Subnautica 2 Meltdown: Krafton Responds to Multi-Million Dollar Lawsuit by Creators
- Krafton has fired the founders of Unknown Worlds Entertainment, the studio behind Subnautica, amid a legal dispute over Subnautica 2’s development.
- The conflict centers on a $250 million earnout clause tied to the success of Subnautica 2 following Krafton’s $750 million acquisition of the studio in 2021.
- Krafton alleges the founders abandoned development to pursue personal projects, causing delays and reduced game scope.
- Fortis Advisors, representing the former owners, has filed a lawsuit accusing Krafton of sabotaging the project to avoid paying the earnout.
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Krafton Takes Control After Firing Unknown Worlds Entertainment’s Founders
The ongoing legal battle between South Korean publisher Krafton and the former owners of Unknown Worlds Entertainment has exposed a deep fracture over the development of Subnautica 2. In a Delaware Chancery Court filing dated Aug. 12, 2025, Krafton delivered its full rebuttal to a verified complaint filed by Fortis Advisors, the shareholder representative of Unknown Worlds’ former owners.
The dispute centers on a 2021 acquisition deal worth up to $750 million, with a $500 million upfront payment and an additional $250 million in potential earnout payments tied to the performance of Subnautica 2. Krafton now argues that the earnout conditions were never met, and that the founders of Unknown Worlds abandoned the sequel’s development to pursue personal projects.
Krafton said in the response that this breakdown in leadership resulted in a diminished game scope, serial delays, and a proposed early access launch that would have delivered only a fraction of the promised content. As a result, Krafton terminated the founders and assumed full control of the studio.
Krafton Says Development Leadership Was Abandoned
According to the filing, Krafton purchased 100% of Unknown Worlds’ outstanding shares in October 2021 and viewed the studio’s founders as essential to the success of future titles. The founders included Subnautica co-creators Charlie Cleveland and Max McGuire, along with studio president Ted Gill. According to Krafton, all three received massive windfalls from the sale – approximately $200 million each for Cleveland and McGuire, and $60 million for Gill.
Despite their financial windfalls, Krafton said the founders quickly distanced themselves from the actual development of Subnautica 2. Cleveland reportedly stepped away to pursue filmmaking, stating in public posts that he was “no longer working on games,” while McGuire allegedly shifted to unrelated internal initiatives. Gill, according to the filing, stayed in an operational role but failed to steer the sequel effectively.
Krafton said this withdrawal of leadership resulted in significant setbacks for Subnautica 2. By March 2024, the team had delivered what Krafton called a substandard playable build, and by late 2024, the game had been delayed multiple times. Krafton said the title’s first early access release would have represented only “about 12% of our intended 1.0 scope.”
Dispute Centers on Massive $250 Million Earnout Clause
The legal filings describe an earnout provision within the Equity Purchase Agreement that would pay the founders up to $250 million if Unknown Worlds achieved specific revenue milestones across four consecutive quarters. The window for achieving those targets was set to close in June 2026. Krafton said in its legal response that this created a financial incentive for the founders to push for an early access release of Subnautica 2 before the game was ready.
According to Krafton, internal communications revealed that the founders were focused on ensuring the game was released within the earnout window. These messages allegedly prioritized release timing over quality, with Krafton citing a developer’s joke that at the planned pace, “we would be in development for 30 years.”
Krafton’s defense argues that rushing a half-finished game to market would have jeopardized the long-term value of the Subnautica franchise. They reference internal warnings about the impact of poorly received sequels, including comparisons to the failure of Kerbal Space Program 2. These concerns ultimately led to Krafton’s decision to halt the planned early access release.
Terminations Followed Breakdown in Trust
Krafton said that by spring 2025, which saw record-breaking earnings for the company, it had lost confidence in the founders’ leadership. The company says its publishing teams provided extensive feedback that Subnautica 2 was not market-ready, and leadership urged Cleveland and McGuire to return to hands-on roles to salvage the project. According to the court filing, both declined, stating they no longer held formal development positions.
When Krafton requested their return, Gill allegedly responded that “there’s no coming back to a job they didn’t have.” Cleveland is quoted as saying that founders should step aside to allow new talent to lead the sequel. Krafton interpreted these responses as a refusal to fulfill contractual obligations tied to the earnout.
Cleveland held the title Co-founder and Studio Head of Unknown Worlds Entertainment but changed over to become the Creative Director around Aug. 12, 2024, according the company’s logs in the HR system.
Following this breakdown, Krafton terminated all three key employees and cited their actions as grounds for cause under the agreement. The company claims the terminations were lawful and necessary to prevent reputational damage to the franchise.
Lawsuit Alleges Retaliation to Avoid Payout
In response to the firings and delayed launch, Fortis Advisors filed a lawsuit accusing Krafton of attempting to dodge the $250 million earnout payment. The plaintiff argues that Subnautica 2 was on track for a successful early access launch and that Krafton’s leadership engaged in a “months-long campaign” to derail the timeline.
Krafton denies these allegations and says its actions were aimed solely at protecting its investment and the long-term success of the Subnautica brand. The defendants argue that their acquisition deal gave them the right to make strategic decisions, especially when it became clear the project was falling behind.
Krafton maintains that the earnout was contingent, not guaranteed, and that the conditions for triggering the payout were not met. The case continues in Delaware’s Court of Chancery and will likely drag out unless both parties can reach a settlement.
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