Judge Orders Subnautica 2 Studio CEO Reinstated Amid Lawsuit

A judge in the messy legal battle between the cofounders of Subnautica developer Unknown Worlds and publisher Krafton has ordered the latter to reinstate CEO Ted Gill and give him control over Subnautica 2‘s Early Access release plans. The decision comes nearly nine months after sudden firings and conflicting claims put one of Steam’s most wishlisted games in the middle of a complex lawsuit.

“Judgment is entered in favor of Fortis [which represents the Unknown Worlds founders] on its Phase One claims,” wrote Vice Chancellor Lori W. Will for the decision handed down in the Delaware Chancery Court on March 16. “Krafton breached the EPA by terminating the Key Employees without valid Cause and by improperly seizing operational control of Unknown Worlds.”

As a result, the “July 1, 2025 Board resolution” that saw Gill and others fired from the company is “declared ineffective to the extent it infringes on Gill’s operational control right.” The judge has ordered Krafton not to impede the reinstated CEO’s “authority over the early access launch of Subnautica 2” and to restore his access “to the Steam platform.”

Just as consequentially, the judge extended the period within which the team can earn a $250 million payout under the terms of Unknown Worlds’ sale to Krafton. The cofounders, which includes Charlie Cleveland and Max McGuire, are now eligible to collect the bonus for performance of the studio up through September 15, 2026, and potentially even to extend the period beyond that date.

“Pretextual” justifications for firing Unknown Worlds’ leadership

The publisher had originally claimed Gill and the other cofounders were fired for failing to get Subnautica 2 ready for a timely launch. It later switched to arguing that the cofounders had unknowingly been working on other projects and tried to steal unauthorized materials prior to their firings. The court rejected both claims.

“Krafton’s newly manufactured justifications for the terminations are pretextual,” reads the court’s decision. “Cleveland and McGuire had taken on limited roles, but that was long known to and accepted by Krafton. As for the data downloads, the former employees were acting to protect the studio’s work product amid Krafton’s takeover attempt. They kept the data confidential and promptly returned it.”

Krafton acquired Unknown Worlds in 2021 for a $500 million equity payout with up to $250 million in an additional earnout for the cofounders if certain sales goals were met by the end of 2025. “The earnout formula is highly leveraged. If Unknown Worlds surpasses a revenue threshold of $69.8 million, Krafton must pay $3.12 for each additional dollar of revenue generated, up to the $250 million cap,” the decision reads.

A CEO embarrassed by a bad deal

It wasn’t until a milestone review in May 2025 as Subnautica 2 headed toward Early Access on Steam that the publisher started to worry about those terms and came up with reasons to delay the launch and remove Gill and the others from the company. The judge writes,

Their models predicted that a successful August 2025 early access launch of Subnautica 2, with “over 1.67 million copies sold by Q4 2025,” would generate significant revenue and “trigger [the] earnout.” A “Financial Planning Base” case scenario indicated a $191.8 million total earnout payment, and a best-case scenario indicated a $242.2 million payment. These figures immediately captured the attention of CEO Kim. Kim, who had personally led the acquisition of Unknown Worlds, felt that Krafton had overpaid. He feared that making an earnout payment would earn him a reputation as a “pushover.”

According to the judge’s findings, this is when Krafton CEO Changhan Kim began looking for ways to avoid the earnout and settled on coming up with reasons to fire the cofounders for cause. This resulted in a month-long plan called “Project X” which included consulting ChatGPT multiple times for help with messaging the change in leadership to fans. The effort culminated in what the court has now ruled to be breach of contract.

The legal fight continues

What remains to be seen is just when exactly Subnautica 2 will now release and whether it will sell well enough to hit the earnout threshold. Litigation from the lawsuit pertaining to damages from the firings remains pending. The court will still have to decide as part of “phase two” what monetary damages if any have resulted from the entire chaotic affair.

“Krafton puts players at the heart of every decision, and that will never change,” the publisher told Kotaku in an emailed statement. “Over the past several months, Krafton and the Unknown Worlds team have worked tirelessly to strengthen the game and prepare it for an Early Access release, with a continued focus on delivering the best possible experience for the Subnautica community. We look forward to pushing out the newly updated version as soon as possible for players.”

It continued, “While we respectfully disagree with today’s ruling, we are evaluating our options as we determine our path forward. Today’s ruling does not resolve the former executives’ claim for damages or an earnout related to Subnautica 2, with further litigation still pending. In the meantime, Krafton’s immediate focus remains unchanged: delivering the best possible game to Subnautica’s fans.”

Update 3/16/2026, 1:19 p.m. ET: Added more information from the court’s ruling.