Details of the legal complaint against Krafton, Inc. by the former leadership of Subnautica 2 developer Unknown Worlds have been made public.
The complaint concerns a $250 million bonus payout tied to revenue targets for the 2025 Early Access release of Subnautica 2, which the plaintiffs – the former shareholders of Unknown Worlds Entertainment, represented by Fortis Advisors LLC – allege owners Krafton, Inc. sought to avoid paying out by delaying the game using “pressure tactics”.
“Krafton engaged in a months-long campaign to delay Subnautica 2’s release,” the complaint, which was filed in Delaware’s Chancery court, alleges. “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 complaint continues.
It then reiterates what was previously argued by Unknown Worlds co-founder and former creative director, Charlie Cleveland, who’s represented in the complaint: that Subnautica 2 was ready for an Early Access launch in 2025.
As such, the studio refused to delay the launch, and the complaint says the company had retained “complete operational control” over Subnautica 2 as part of the 2021 agreement for Krafton to acquire Unknown Worlds.
“Rather than cave to Krafton’s bullying,” the studio had to take on the previously mentioned “pre-launch tasks” itself, the complaint says.
These events are allegedly what led to the leadership removal.
“Its efforts at delay had failed, and the launch was imminent. So Krafton decided to go nuclear. In flagrant disregard of the parties’ contract, Krafton terminated without cause three former owners of Unknown Worlds – Charles Cleveland, Adam ‘Max’ McGuire, and Edward ‘Ted’ Gill – and seized control of the company.”
The complaint continues: “Krafton’s first decision upon taking over? To delay the launch of Subnautica 2 until sometime in 2026. That way, Krafton could keep the game’s revenue for itself, while avoiding the $250 million earnout it would likely have owed the Founders and other Unknown Worlds employees.”
After the founders were ousted, it was revealed Krafton, Inc. had delayed the game to 2026, citing community feedback and the game needing more content for Early Access. This decision was made prior to the leadership change, according to Krafton.
Steve Papoustis of The Callisto Protocol studio Striking Distance replaced the leadership team of Unknown Worlds and became CEO.
From here, the complaint documents some of the community reaction to the founders’ removal, alleging Krafton has “decimated” community trust in its “ploy” to “delay the game, avoid the earnout, keep the money for itself”.
The plaintiffs are seeing equitable and monetary relief, as well as having “complete creative and operational control” returned to them.
It’s alleged that the earnout agreement “forbade Krafton from terminating the Founders without cause”. The complaint also argues that Krafton’s actions have affected anticipation for Subnautica 2, which is the second most-wishlisted game on Steam.
10% of the $250 million payout was earmarked for staff, but the complaint also repeats an intriguing detail that came up in a recent Bloomberg report: that the founders promised to share more of the payout beyond that, presumably from their own earnings.
“Beyond this guarantee, the Founders planned to share even more of the earnout with their dedicated team.”
Krafton will extend the eligibility period for that 10% payout despite delaying the game, according to a recent Bloomberg report, which will benefit around 40 of the 100-or-so staff at the studio.
One passage – and something that will no doubt be key as the situation develops – discusses the wording in the 2021 agreement that would permit Krafton to terminate the founders.
“The sole exception to that prohibition allows Krafton to terminate employees ‘for Cause’, a high bar requiring commission of a ‘felony’, ‘an international act of fraud or dishonesty,’ ‘intentional, wrongful disclosure of trade secrets,’ or a ‘willful act or omission by such individuals that constitutes gross misconduct and that is injurious to [Unknown Worlds]’ where ‘willful’ means ‘committed without good faith and without a reasonable belief that the action or omission was in [Unknown Worlds’] best interest.'”
“Krafton further agreed ‘not [to] take any actions, the primary business purpose of which is to deprive Sellers’ Earnout Payments,’ and to ‘consult in good faith with the management of [Unknown Worlds]…prior to taking any action that would reasonably be expected to materially decrease the Earning Amount.'”
Other points of contention discussed in the complaint include Krafton’s understanding of the founders’ day-to-day responsibilities on Subnautica 2 relative to wider goals to grow the company and expand the Subnautica IP, with reference made to a potential movie project.
It’s alleged that Krafton’s stance on the payouts changed once financial projections were made around Subnautica 2’s launch, and that it became clear what the earnings payout would be for staff.
“From mid-April forward, Krafton began building a new story: that Subnautica 2 was not ready and could not be released in [redacted] 2025.”
GamesIndustry.biz has reached out to Krafton for comment. It has already responded regarding the complaint to Aftermath, however, saying “decisions 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.
“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. In the meantime, Krafton remains focused on what matters: delivering the best possible game as quickly as possible to Subnautica’s fans.”
Read our timeline of the former Subnautica 2 leads versus Krafton here.
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