Court orders CEO reinstatement after Krafton's AI-assisted scheme to avoid $250 million earnout payment
South Korean gaming conglomerate Krafton Inc. has been ordered to reinstate the CEO of its subsidiary, Unknown Worlds Entertainment, after the court found the company orchestrated an improper takeover campaign, with the plan partially designed using ChatGPT.
The court ruled that Krafton breached its 2021 acquisition agreement by wrongfully terminating three key executives without valid cause, in what the court characterised as a scheme to avoid paying up to $250 million in earnout payments.
Unknown Worlds Entertainment, the studio behind the popular underwater survival game Subnautica, was acquired by Krafton in October 2021 for $500 million upfront, with an additional earnout of up to $250 million contingent on revenue performance.
The Equity Purchase Agreement guaranteed that founders Charlie Cleveland and Max McGuire, along with CEO Ted Gill, would retain "operational control" of the studio and could only be terminated for cause.
The relationship deteriorated as Unknown Worlds prepared to release Subnautica 2 in 2025.
Internal projections showed the sequel would generate significant revenue, easily triggering the earnout.
According to court documents, Krafton CEO Changhan Kim feared he had agreed to a "pushover" contract and became concerned about his company's financial exposure.
The court's opinion reveals an unusual...
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