Krafton Subnautica Lawsuit: Case Settled July 2026

- 2026-07-02
krafton subnautica lawsuit

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- 2026-07-02

Short summary: The Krafton Subnautica lawsuit - filed by the former Unknown Worlds executives against their parent company Krafton over a disputed $250 million earnout - ended in a confidential settlement announced July 1, 2026. A Delaware judge had already ruled against Krafton in March 2026, finding it illegally fired the studio's founders and CEO to dodge the payout, before both sides resolved the case ahead of a second trial on damages.

Krafton Subnautica Lawsuit: What Happened and How It Ended

Krafton, the South Korean publisher behind Subnautica 2, was sued by the former leadership of its own studio, Unknown Worlds Entertainment, over a $250 million earnout tied to the game's success. A Delaware Court of Chancery judge ruled against Krafton in March 2026, and the two sides reached a settlement on June 30, 2026, ending the case before a second trial on monetary damages could take place.

Is Subnautica 2 Getting Sued?

No, the lawsuit was not against the game itself, and it is now over. The suit was filed by Fortis Advisors, LLC, acting on behalf of Unknown Worlds' former shareholders and executives, against Krafton, Inc. Krafton was the defendant, not Subnautica 2. As of July 1, 2026, Krafton confirmed the case had been dismissed following a settlement.

Krafton Subnautica Lawsuit: Case Background

Krafton acquired Unknown Worlds Entertainment, the studio behind the original Subnautica, in 2021. Under the Equity Purchase Agreement (EPA), the deal included:

  • $500 million paid upfront
  • Up to $250 million in additional "earnout" payments tied to future revenue from Subnautica 2
  • A revenue threshold of $69.8 million, above which Krafton owed $3.12 for every additional dollar of revenue, up to the $250 million cap
  • A contractual guarantee that founders Charlie Cleveland and Max McGuire, plus CEO Edward "Ted" Gill, would retain "operational control" of the studio and could only be terminated for specific, contractually defined "cause"

As Subnautica 2's 2025 early access launch approached, Krafton's own internal financial models projected the earnout could reach between $191.8 million (base case) and $242.2 million (best case) - figures that reportedly alarmed Krafton CEO Changhan "CH" Kim.

Why Were Subnautica Founders Fired?

According to court filings, Kim grew concerned that paying the earnout would make him look like he had overpaid for the studio. Per the Delaware court's findings, Kim consulted the AI chatbot ChatGPT for advice on how to avoid the payment, which led to an internal effort known as "Project X." On July 1, 2025, Krafton's board voted to remove Gill, Cleveland, and McGuire from their roles.

Krafton's stated justification for the firings shifted over time:

  1. Initially, Krafton said Subnautica 2 was not ready for release and the executives were responsible.
  2. Later, during litigation, Krafton argued the founders had "semi-retired" from active duties and had improperly downloaded confidential company data on their way out.

The court found both justifications were pretextual - meaning not the real reason for the firings and that Krafton had known about and accepted the founders' reduced day-to-day roles well before the terminations.

Did Subnautica Get a Lawsuit? The Filing Details

Yes. Fortis Advisors filed suit in the Delaware Court of Chancery on July 10, 2025 (publicly disclosed by Krafton on July 24, 2025), captioned Fortis Advisors, LLC v. Krafton, Inc., Case No. C.A. 2025-0805-LWW. The complaint alleged:

  • Breach of the Equity Purchase Agreement's earnout and operational-control provisions
  • Breach of contract, seeking specific performance (reinstatement)
  • Breach of the implied covenant of good faith and fair dealing

The court split the case into two phases: Phase One covered reinstatement and operational control, while Phase Two was reserved for the earnout and monetary damages. A trial on Phase One began November 17, 2025.

Did Krafton Lose the Subnautica Lawsuit?

Yes, on the first phase of the case. On March 16, 2026, Vice Chancellor Lori W. Will ruled in favor of Fortis Advisors, finding that Krafton had breached the EPA by terminating the Key Employees without valid cause and by improperly seizing operational control of Unknown Worlds. As a remedy, the court:

  • Ordered Krafton to reinstate Ted Gill as CEO with full operational authority
  • Declared the July 1, 2025 board resolution that fired the executives ineffective to the extent it infringed on Gill's operational control
  • Extended the earnout testing window by 258 days - the exact length of Gill's ouster - pushing the new performance deadline to September 15, 2026

Krafton said in a statement it "respectfully disagree[d]" with the ruling but confirmed it was moving forward. The March 2026 decision resolved only Phase One; the earnout amount and any damages were still scheduled for a separate Phase Two proceeding before the case settled.

Krafton Subnautica 2 Lawsuit Response and Aftermath

After reinstatement, tensions continued. In March 2026, the executives briefly accused Krafton of violating the court's order by announcing Subnautica 2's early access release date without Gill's approval — an allegation the executives' own lawyers later withdrawn as moot in an April 2026 court filing. Krafton denied any violation.

Subnautica 2 launched into early access on May 14, 2026, under Unknown Worlds' name rather than Krafton's, following the reinstatement ruling. The game reportedly sold 2 million copies within 12 hours and surpassed 4 million copies within five days, with one report estimating roughly $100 million in revenue in its first week.

Krafton Subnautica Lawsuit Settlement: Current Status (July 2026)

The case reached its conclusion in early July 2026:

  • June 30, 2026: Fortis Advisors filed a withdrawal of the lawsuit in Delaware Court of Chancery, indicating a settlement had been reached.
  • July 1, 2026: Krafton officially confirmed the settlement and case dismissal. The specific settlement amount was not disclosed by either party.
  • As part of the settlement, Krafton agreed to pay bonuses to Unknown Worlds' entire current staff, not just the employees who were with the studio at the time of the 2021 acquisition. Gill told Bloomberg the payouts would be "significantly more" than the original agreement called for.
  • Bonuses will be distributed in three annual installments, with additional incentives tied to the game's continued development.
  • Ted Gill stepped down as CEO as part of the settlement, telling Bloomberg the two sides had "mutually agreed to part ways." Krafton and Unknown Worlds are now searching for a new CEO from outside both companies.
  • The settlement resolves all pending litigation, including the Phase Two earnout and damages claims that had not yet gone to trial.

Because the settlement is confidential, it is not publicly known whether Krafton paid the full $250 million cap, a negotiated lower figure, or a structured payout tied to future sales. Exact figures have not been publicly disclosed.

Who Is Affected by This Case?

This was a business-to-business contract dispute between a publisher and the former owners/executives of an acquired studio - it is not a consumer class action, and Subnautica 2 players are not party to any claim or eligible for compensation. The parties directly affected are:

  • Unknown Worlds Entertainment's current and former staff (who benefit from the bonus settlement)
  • Krafton and Unknown Worlds shareholders
  • The three named former executives: Ted Gill, Charlie Cleveland, and Max McGuire

What to Do If You Believe You're Affected

If you are a current or former Unknown Worlds employee and have questions about eligibility for the settlement bonuses, this article is general information only, not personalized legal or financial advice. If you believe you may have a claim related to this matter:

  • Check with Unknown Worlds/Krafton HR or your employment contract for official communication about bonus eligibility and payout timing, since terms were not made public.
  • Review your original offer letter or equity agreement if you were employed at the time of the 2021 acquisition, as earlier reporting indicated eligibility initially depended on employment date.
  • Consult an employment attorney if you have a dispute about your own compensation tied to this settlement — general online information cannot substitute for advice based on your specific contract.
  • Monitor Delaware Court of Chancery public dockets under Case No. C.A. 2025-0805-LWW for any further filings, since the underlying case record remains public even after dismissal.

FAQ

Is Subnautica 2 getting sued?

No. The lawsuit was between Krafton and the former leadership of its subsidiary Unknown Worlds, not against the game. That case was settled and dismissed as of July 1, 2026.

Did Krafton lose the Subnautica lawsuit?

Yes, on the first phase. A Delaware judge ruled in March 2026 that Krafton breached its acquisition agreement by firing the studio's founders and CEO without valid cause. The case then settled in June 2026 before a second trial on damages could occur.

Why were Subnautica founders fired?

Krafton fired CEO Ted Gill and co-founders Charlie Cleveland and Max McGuire in July 2025, initially citing concerns about the game's readiness, then later claiming they had abandoned their roles. A Delaware court found both justifications pretextual and ruled the real motive was avoiding a $250 million earnout payment.

Did Subnautica get a lawsuit?

Yes. Fortis Advisors, LLC, representing Unknown Worlds' former shareholders and executives, sued Krafton in Delaware Court of Chancery on July 10, 2025 (Case No. C.A. 2025-0805-LWW) over the earnout dispute. The case settled in June 2026.

Was there a Subnautica 2 delay tied to the lawsuit?

Yes. The executives alleged Krafton intentionally delayed the game's launch to run out the clock on the earnout period. The court's March 2026 ruling extended the earnout deadline to September 15, 2026, to account for the delay caused by the executives' wrongful termination.

Did Krafton and Unknown Worlds reach a bonus settlement?

Yes. As part of the June 2026 settlement, Krafton agreed to pay bonuses to all current Unknown Worlds staff, paid over three annual installments, though the exact dollar amount was not publicly disclosed.

Sources

Official government sources:

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