The Krafton Subnautica 2 lawsuit became one of the biggest legal disputes in the video game industry in 2025 and 2026. The conflict involved Krafton, the publisher of Subnautica 2, and the former leadership of Unknown Worlds Entertainment, the studio behind the Subnautica series.
At the center of the dispute was a potential $250 million earnout connected to Krafton’s 2021 acquisition of Unknown Worlds. Former Unknown Worlds leaders alleged that Krafton removed them and delayed Subnautica 2 to avoid paying the earnout.
Krafton strongly denied that allegation.
However, the legal dispute later took a major turn. In March 2026, a Delaware judge ruled against Krafton on key issues and ordered former CEO Ted Gill to be reinstated. Krafton said it disagreed with the ruling and was considering its options.
Then, in July 2026, the parties reached a mutual settlement and agreed to dismiss the pending legal proceedings.
What Was the Subnautica 2 Lawsuit About?
The dispute began after Krafton acquired Unknown Worlds in 2021 for approximately $500 million.
The acquisition agreement included an additional performance-based earnout that could reach $250 million if certain conditions were met.
The former Unknown Worlds executives involved in the dispute were:
- Ted Gill, former CEO
- Charlie Cleveland, co-founder
- Max McGuire, co-founder
The executives alleged that Krafton took actions that interfered with the conditions needed for the earnout and that their removals were connected to the potential payment.
Krafton rejected those allegations.
What Was Krafton’s Response to the Lawsuit?
Krafton’s response was that the company did not delay Subnautica 2 simply to avoid paying the $250 million earnout.
Instead, Krafton said it was concerned about the game’s development and quality.
The company argued that releasing Subnautica 2 before it was sufficiently developed could have damaged the Subnautica and Unknown Worlds brands.
Krafton said its decisions were made to protect the game and meet player expectations.
In its legal response, Krafton also alleged that the former Unknown Worlds leadership had become less involved in Subnautica 2 development.
The publisher claimed that the former leaders had effectively lost interest in the project and were pursuing other interests instead.
Did Krafton Accuse the Founders of Prioritizing the $250 Million Bonus?
Yes.
Krafton’s legal response argued that the former leadership was focused on the financial benefits of the earnout rather than ensuring that Subnautica 2 was ready for release.
Krafton specifically disputed the claim that it removed the executives simply to avoid paying the bonus.
The company argued that its leadership changes were necessary because it believed the studio needed stronger direction and that the game needed more development work.
These were Krafton’s allegations and legal arguments, not facts independently established at the time they were made.
What Did the Former Unknown Worlds Executives Say?
The former executives presented a very different version of events.
They alleged that Krafton deliberately interfered with the development and release of Subnautica 2 because the game’s success could trigger the large earnout payment.
They argued that the game was sufficiently ready for Early Access and that Krafton’s actions prevented the contractual conditions from being met.
Charlie Cleveland publicly rejected Krafton’s characterization of the earnout dispute and said the idea that the three executives wanted to keep the money for themselves was false.
Why Was Subnautica 2 Delayed?
Krafton said the game needed additional development and that it did not want to release a sequel that failed to meet player expectations.
The former executives argued that the delay was connected to the potential earnout.
Therefore, there were two competing explanations:
| Krafton’s position | Former executives’ position |
| The game needed more development | The game was ready for Early Access |
| The delay protected quality | The delay threatened the earnout |
| Leadership changes were justified | Executives were improperly removed |
| Krafton was protecting the franchise | Krafton was trying to avoid the bonus |
It is important to distinguish these competing allegations from the court’s later findings.
What Did the Delaware Court Decide?
The case took a major turn in March 2026.
Vice Chancellor Lori W. Will of the Delaware Court of Chancery ruled against Krafton on important parts of the dispute.
The court found that Krafton had breached contractual obligations relating to Unknown Worlds and improperly removed CEO Ted Gill.
Gill was ordered to be reinstated as CEO with full operational authority over Unknown Worlds.
The court also extended the period for the earnout calculation, giving the studio additional time to meet the relevant conditions.
What Was Krafton’s Response to the March 2026 Ruling?
Krafton did not agree with the ruling.
The company said it respectfully disagreed with the court’s decision and was evaluating its legal options.
At the same time, Krafton said its immediate priority remained preparing Subnautica 2 and delivering the best possible game to players.
This was an important response because Krafton did not simply accept the court’s reasoning.
The company maintained its focus on the game while considering what legal steps were available.
Did Ted Gill Return as CEO?
Yes.
The March 2026 court ruling ordered Ted Gill’s reinstatement as CEO with full operational authority.
However, that did not become a permanent leadership arrangement.
After the later settlement, Gill agreed to leave the CEO position again.
What Happened to the $250 Million Earnout?
The earnout was one of the biggest issues in the entire dispute.
The original acquisition agreement allowed for a potential earnout of up to $250 million, depending on contractual performance conditions.
The litigation focused heavily on whether Krafton’s actions interfered with those conditions.
After the parties settled in July 2026, the precise financial terms of the settlement were not publicly disclosed.
Reports said bonuses would be distributed to Unknown Worlds employees, including current staff, but the exact settlement amount between the parties was not disclosed.
Therefore, it would be inaccurate to say that the settlement definitely involved a publicly confirmed $250 million payment to the three former executives.
What Happened to the Lawsuit?
On July 1, 2026, Krafton announced that it, Unknown Worlds, Ted Gill, Charlie Cleveland and Max McGuire had reached a mutual settlement.
The parties agreed to dismiss all pending legal proceedings.
This means the long-running legal dispute ended without the remaining claims going through a full final trial.
What Does the Settlement Mean for Unknown Worlds Employees?
One notable part of the settlement is that bonuses are reportedly being distributed more broadly among Unknown Worlds staff.
The Verge reported that bonuses would be paid to all current Unknown Worlds staff, rather than being limited to people who were at the company when Krafton acquired it in 2021. The payments are expected to be made over three years.
This is significant because the original dispute centered heavily on the potential earnout and who would benefit from it.
Is Ted Gill Still CEO of Unknown Worlds?
No.
Following the settlement, Gill agreed to step down from his CEO role.
Gill said that new leadership was the best path forward for Unknown Worlds.
Krafton and Unknown Worlds will continue working on Subnautica 2.
What Does Krafton Say Now?
Krafton’s position evolved from strongly defending the leadership changes to settling the dispute.
The company and the former executives agreed to end the litigation rather than continue the legal battle.
Krafton also said that Unknown Worlds would continue leading development of Subnautica 2, while Krafton would provide support for the game’s success.
Did Krafton Admit It Was Wrong?
Not based on the public settlement announcement.
A settlement does not automatically mean that one side admitted all of the other side’s allegations.
Krafton had previously denied that it delayed Subnautica 2 to avoid the earnout and defended its leadership decisions.
The July 2026 settlement ended the legal dispute, but the publicly announced agreement does not establish a general admission of wrongdoing by Krafton.
Did the Court Say Krafton Tried to Avoid Paying $250 Million?
The March 2026 ruling was significant for the former Unknown Worlds leadership, but it is important to be precise.
The court found contractual breaches and ordered Gill’s reinstatement. The court’s findings were based on the evidence and contractual obligations before it.
However, readers should not turn every allegation made during the lawsuit into a proven fact.
The original dispute included competing claims about the reasons for the leadership changes, the game’s development status and the earnout.
What Happened to Subnautica 2?
The legal dispute did not stop Subnautica 2 permanently.
The game entered Early Access in May 2026 and reportedly became a major commercial success.
The Verge reported that the game sold more than four million copies in its first five days.
The settlement now allows Unknown Worlds to continue development with Krafton’s support.
Krafton Subnautica 2 Lawsuit Timeline
| Date | Event |
| 2021 | Krafton acquired Unknown Worlds |
| 2025 | Dispute over leadership, development and potential earnout became public |
| July 2025 | Former Unknown Worlds leaders filed a lawsuit against Krafton |
| August 2025 | Krafton formally responded to the allegations |
| March 2026 | Delaware court ruled against Krafton on key contractual issues and ordered Ted Gill’s reinstatement |
| May 2026 | Subnautica 2 entered Early Access |
| July 1, 2026 | Krafton and the former executives reached a settlement |
| July 2026 | All pending legal proceedings were agreed to be dismissed |
Frequently Asked Questions
What did Krafton say about the Subnautica 2 lawsuit?
Krafton denied that it delayed the game to avoid the $250 million earnout. It said the game needed more development and that its leadership changes were intended to protect the quality of Subnautica 2 and the Subnautica franchise.
Did Krafton settle the Subnautica 2 lawsuit?
Yes. Krafton, Unknown Worlds and Ted Gill, Charlie Cleveland and Max McGuire reached a mutual settlement in July 2026 and agreed to dismiss the pending legal proceedings.
How much did Krafton pay in the settlement?
The specific settlement amount was not publicly disclosed. Reports indicate that bonuses will be paid to Unknown Worlds staff, but the exact settlement figure should not be presented as confirmed.
Was the lawsuit about $250 million?
Yes. A potential $250 million earnout was a central part of the dispute stemming from Krafton’s acquisition of Unknown Worlds.
Did Ted Gill return as CEO?
Yes. A Delaware court ordered his reinstatement in March 2026. However, Gill later agreed to step down again as part of the settlement.
Is the Krafton lawsuit still active?
No. The parties reached a settlement in July 2026 and agreed to dismiss the pending legal proceedings.
Will Unknown Worlds continue making Subnautica 2?
Yes. Krafton said Unknown Worlds will continue leading development, with Krafton providing support for the game’s success.
Bottom Line
Krafton denied sabotaging Subnautica 2 to avoid its potential $250 million earnout, saying the game needed more development and that its leadership changes were made to protect the franchise. A Delaware judge later ruled against Krafton on key contractual issues and reinstated Ted Gill as CEO.
In July 2026, Krafton and the former Unknown Worlds leaders settled the dispute and agreed to dismiss the lawsuits. Unknown Worlds will continue developing Subnautica 2, while Ted Gill will step down as CEO.