What Is the Subnautica 2 Lawsuit?
The Subnautica 2 lawsuit is a breach-of-contract case that former Unknown Worlds shareholders brought against Krafton, Inc. in the Delaware Court of Chancery. Fortis Advisors LLC, the sellers' representative, filed it on July 10, 2025. Krafton had fired the studio's three Key Employees nine days earlier.
Krafton bought Unknown Worlds Entertainment, the studio behind Subnautica, in October 2021. The price was $500 million upfront plus an earnout of up to $250 million. The earnout depended on studio revenue, so the early access launch of Subnautica 2 decided how much Krafton might owe.
The Subnautica 2 lawsuit, explained simply, asks whether Krafton had valid cause to remove founders Charlie Cleveland and Max McGuire and CEO Ted Gill. It also asks who controlled the game's launch. It is not a class action, and no class of claimants exists to join.
Why Was the Subnautica 2 Lawsuit Filed?
The Subnautica 2 lawsuit was filed because Fortis alleges Krafton fired the studio's leaders to avoid a $250 million bonus. The earnout paid $3.12 for every dollar of revenue above $69.8 million during the testing period. Krafton's internal projections showed a successful early access launch could reach the $250 million cap.
Krafton's CEO, Changhan Kim, viewed that outcome as a bad deal, according to the court's findings. Krafton's legal staff warned him that firing the leaders with cause would probably not erase the earnout. Krafton then formed an internal effort called Project X to force a deal or take over the studio.
Krafton told the court a different story. Krafton said the founders had stopped doing their jobs and that Subnautica 2 was not ready for release. The court rejected that account after trial.
What Harms Does the Subnautica 2 Lawsuit Allege?
The Subnautica 2 lawsuit alleges five distinct harms, and all of them are contract-based rather than physical injuries. Four concern what Krafton did to the Key Employees and the studio. The fifth concerns the earnout money itself. The March 2026 opinion resolved the termination and control claims, and the earnout damages question was reserved for a later phase.
Breach of Contract
Breach of contract is a failure to perform a promise in a legally binding agreement without a valid legal excuse.
Fortis pleaded that Krafton broke the Equity Purchase Agreement (EPA) that governed the 2021 acquisition. The complaint's closing summary lists four broken promises. Krafton promised to leave operational control with the founders, to consult them before any action that could harm the earnout, and not to act with the primary purpose of frustrating the earnout. It also promised not to fire them without cause.
The court's March 16, 2026 opinion agreed on two of those points, termination and control. The case status section below describes that ruling.
Termination Without Cause
Termination without cause means ending someone's employment without meeting the reason that a contract requires.
The EPA defined Cause narrowly. It required an intentional act of fraud or dishonesty, a felony conviction, willful gross misconduct, or intentional wrongful disclosure of trade secrets. Krafton sent termination notices to Cleveland, McGuire and Gill on July 1, 2025, citing their alleged intention to proceed with a premature release of Subnautica 2.
Fortis argued none of those grounds applied. The court held that Krafton had no valid Cause, so the firings breached the EPA.
Loss of Operational Control
Operational control is the contractual authority to run a business's day-to-day decisions, such as budgets, hiring and product launches.
The EPA guaranteed the Key Employees operational control while any of them stayed employed. That authority covered the product roadmap, launch, budgeting and employee matters. Fortis alleged Krafton took over the Steam publishing app and installed Krafton-aligned directors on July 1, 2025.
That day Krafton also passed a board resolution barring Subnautica 2's early access release without further board approval. The court later declared the resolution ineffective to the extent it infringed Gill's control.
Breach of the Implied Covenant of Good Faith
The implied covenant of good faith and fair dealing is a legal duty, read into most contracts, not to undermine the other party's right to the contract's benefits.
Fortis pleaded this as a separate count. The complaint alleges Krafton ran a months-long campaign to delay Subnautica 2. It says Krafton pulled marketing materials, refused to follow through on partnerships and limited resources.
Krafton denies the allegation. The coverage reviewed for this page did not report a separate ruling on this count, because the March 2026 holdings rest on the EPA's express terms.
Impairment of the Earnout
An earnout is extra purchase-price money that a seller can earn after a sale if the business hits agreed targets.
Fortis alleged the delay and the firings impaired the founders' chance to earn the full $250 million. The court summaries report Krafton's internal projections at about $191.8 million in a base case and $242.2 million in a best case. Neither figure was an award.
Vice Chancellor Will reserved the question of earnout damages for Phase Two. The reported July 2026 settlement came before any Phase Two ruling.
What Is the Current Status of the Subnautica 2 Lawsuit?
The current status of the Subnautica 2 lawsuit is settled as of October 24, 2026. Bloomberg reported the settlement on July 1, 2026, and Krafton said the parties agreed to dismiss all pending legal proceedings. No court order confirming dismissal was reviewed for this page, and the settlement's full terms are not public.
Fortis Advisors LLC v. Krafton, Inc.
Fortis Advisors LLC sued Krafton, Inc. in the Delaware Court of Chancery on July 10, 2025, as representative of Unknown Worlds' former shareholders. Vice Chancellor Lori W. Will split the case into two phases. Phase One covered the firings and operational control, and Phase Two would cover whether Krafton impaired the earnout and what damages follow.
| Court | Delaware Court of Chancery |
| Case Number | C.A. No. 2025-0805-LWW |
| Judge | Vice Chancellor Lori W. Will |
| Plaintiff | Fortis Advisors LLC, representing Unknown Worlds' former shareholders |
| Defendant | Krafton, Inc. |
| Filed | July 10, 2025 (complaint made public July 16, 2025) |
| Counts | Breach of the EPA, specific performance, breach of the implied covenant of good faith and fair dealing |
| Phase One Opinion | March 16, 2026 |
| Phase Two | Earnout damages, reserved; settlement reported before any ruling |
| Status | Settled; reported July 1, 2026 |
Will's March 16, 2026 opinion found that Krafton breached the EPA by firing the three Key Employees without valid cause and by usurping operational control. She reinstated Gill as CEO and ordered his Steam access restored. She extended the base earnout testing period by 258 days to September 15, 2026. Fortis kept the right to extend it to March 15, 2027. The order did not reinstate Cleveland or McGuire.
Did the Subnautica 2 Lawsuit Settle?
Yes. The Subnautica 2 lawsuit settled, according to Bloomberg's July 1, 2026 report.
The settlement's full terms are not public. Reports say Krafton agreed to pay bonuses to Unknown Worlds developers. Gill told Bloomberg that staff would be "compensated significantly more" than the original acquisition agreement outlined, and the bonuses now reach staff who joined after 2021.
The payout was worth up to $250 million under the earnout formula. Krafton owed $3.12 for every dollar of revenue above $69.8 million, up to the cap. Whether that exact amount changed hands has not been confirmed publicly.
Subnautica 2's sales made the payout hard to avoid. The game sold more than 4 million copies in its first week after the May 14, 2026 launch, and Alinea Analytics estimated over $100 million in first-week revenue. The Korean Economic Daily reported on May 28, 2026 that Krafton would pay up to $250 million, and neither company had confirmed that report at the time.
Bloomberg reported in July 2025 that the original structure sent about $25 million to roughly 40 employees and $225 million to former leadership. The settlement reportedly widened the employee share, though no breakdown has been published.
Latest Subnautica 2 Lawsuit Updates
The latest Subnautica 2 lawsuit updates and news, including new filings, rulings, and case-count reports, are tracked below as they're confirmed. The Fortis Advisors v. Krafton case settled as of October 2026; the terms and timing are covered in the entries below. Every verified development is listed in the timeline below, in order.
Full Subnautica 2 Lawsuit Timeline
Krafton Acquires Unknown Worlds
Krafton completed its acquisition of Unknown Worlds Entertainment in October 2021 for $500 million upfront plus an earnout of up to $250 million. The Equity Purchase Agreement named Cleveland, McGuire and Gill as Key Employees with operational control of the studio.
Krafton Projections Show a Possible Full Earnout
Krafton's internal projections in spring 2025 showed a successful Subnautica 2 early access launch could reach the $250 million earnout cap, according to the court's findings. Fortis alleges Krafton began working to delay the launch after it reviewed those numbers.
Krafton Posts a Message Inviting the Founders Back
Krafton posted a message on Unknown Worlds' and Subnautica's websites on June 12, 2025, inviting Cleveland and McGuire to lead Subnautica 2 again. Unknown Worlds' leadership had no part in the message, and the court viewed it as one piece of a pressure campaign.
Krafton Takes Over the Steam Publishing App
Krafton assumed control of the Subnautica 2 Steam publishing app in June 2025, locking Unknown Worlds out of its own release tools. The court found that Gill's repeated requests to restore access were ignored, which effectively blocked an early access release.
The Key Employees Download Company Files
McGuire downloaded nearly 100,000 files and Cleveland more than 72,000 in June 2025, and Gill exported his email, Drive and Slack data. The court later found they acted defensively, expecting a takeover, and that the files were returned and not misused.
Krafton Fires the Three Key Employees
Krafton sent termination notices to Cleveland, McGuire and Gill on July 1, 2025, effective at the end of the month. The notices cited their alleged intention to proceed with a premature release. The same day Krafton replaced them on the board and appointed Steve Papoutsis as Unknown Worlds' CEO.
Fortis Files Suit in Delaware
Fortis Advisors LLC filed its complaint against Krafton in the Delaware Court of Chancery on July 10, 2025. It pleaded breach of the EPA, breach of contract seeking specific performance, and breach of the implied covenant of good faith and fair dealing. Cleveland announced the filing the same day on his blog.
Bloomberg Reports Krafton Extended the Bonus Period
Bloomberg reported on July 15, 2025 that Krafton had extended the earnout period into 2026. GameSpot, relaying the report, said the change gave the team a better chance to hit its revenue benchmarks after fans called for a boycott of Subnautica 2.
The 58-Page Complaint Becomes Public
The 58-page complaint became public on July 16, 2025, six days after filing. Its closing summary listed four promises it said Krafton broke, covering creative control, consultation on the earnout, frustration of the earnout and termination without cause.
Krafton Says It Will Defend Itself in Court
Krafton told GamesRadar+ on July 17, 2025 that it made its decisions to protect the quality of Subnautica 2 and the reputation of the franchise. The publisher said it was disappointed by the suit and looked forward to defending itself in court.
Krafton Files Its Answer
Krafton's August 2025 answer denied the founders' claims paragraph by paragraph. It argued Cleveland and McGuire had left game-making for personal projects and that Gill focused on maximizing the earnout. Krafton asked the court to deny relief and award its costs.
Unknown Worlds Sues Its Own Founders
Unknown Worlds Entertainment filed a separate 74-page suit in the Delaware Court of Chancery on August 15, 2025, naming Cleveland, McGuire and Gill. The suit alleged they abandoned their duties and downloaded company files before their terminations.
Krafton Drops Its Premature-Release Ground in Discovery
During 2025 discovery, Krafton told the court that Subnautica 2's readiness was no longer a reason for the firings. Vice Chancellor Will said that was exactly the reason cited in Krafton's answer. The court also declined Krafton's request to forensically inspect the founders' devices.
A Founders' Filing Alleges Krafton's CEO Consulted ChatGPT
A pre-trial filing surfaced by Game Developer alleged that Krafton CEO Changhan Kim discussed a takeover over Slack and used ChatGPT to brainstorm ways to avoid the earnout. Krafton responded that the case turned on founders seeking jobs they had not been doing.
The Court Rules That Krafton Breached the Acquisition Agreement
Vice Chancellor Lori W. Will issued her Phase One opinion on March 16, 2026. She found Krafton breached the EPA by firing the Key Employees without cause and usurping control. She reinstated Gill as CEO and extended the earnout testing period to September 15, 2026. Krafton said it respectfully disagreed.
Founders' Lawyers Object to a Leaked Release Memo
Lawyers for Gill, Cleveland and McGuire wrote to Vice Chancellor Will on March 17, 2026, objecting to a memo from Papoutsis announcing a May early access release. They said only Gill could make that decision and raised the possibility of contempt. Krafton replied on March 18 that nothing it did violated the order.
Fortis Withdraws Its Contempt Motion
Fortis withdrew its contempt motion in April 2026 and said it no longer contended Krafton violated the March 16 opinion. The parties asked the court to remove the June 12, 2026 evidentiary hearing from its calendar and treat all pending sanctions requests as moot.
Subnautica 2 Launches in Early Access
Subnautica 2 launched in early access on May 14, 2026 on PC and Xbox Series X|S. It reportedly sold 1 million copies in its first hour, 2 million within 12 hours and more than 4 million within a week, with a Steam peak above 467,000 concurrent players.
Korean Economic Daily Reports Krafton Will Pay the Earnout
The Korean Economic Daily reported on May 28, 2026 that Krafton had agreed to pay up to $250 million to Unknown Worlds' former shareholders after the launch's strong sales. The outlet said the cap equaled roughly 35 percent of Krafton's 2025 operating profit. Neither company had publicly confirmed the report.
Krafton and the Founders Settle
Bloomberg reported on July 1, 2026 that Krafton and the three fired Unknown Worlds leaders had settled. Krafton said the parties agreed to dismiss all pending legal proceedings. Gill stepped down as CEO voluntarily, and Krafton said Unknown Worlds would continue to lead Subnautica 2's development.
What Evidence Mattered in the Subnautica 2 Lawsuit?
The evidence that mattered most in the Subnautica 2 lawsuit was Krafton's own internal communications. Court summaries describe a ChatGPT conversation in which Kim sought advice on the earnout. ChatGPT first said the earnout would be difficult to cancel, then suggested the Project X task force. Kim admitted at trial that he had deleted certain chat logs.
Other evidence came from Krafton's executives and records. Maria Park, Krafton's global head of corporate development, told Kim that the earnout would likely still be owed after a dismissal with cause. The termination letters cited only a premature release. Human resources and finance records showed Krafton knew about the founders' changed roles, which mattered under the mend-the-hold doctrine.
The data downloads were the contested evidence on Krafton's side. The court found the downloads improper from an IT view but not dishonest under the contract. In the court's words, "these are not the actions of thieves."
How Did Krafton Respond to the Subnautica 2 Lawsuit?
Krafton responded to the Subnautica 2 lawsuit by denying wrongdoing and arguing the founders had abandoned their roles. Its August 2025 answer said Cleveland and McGuire turned to personal projects, and that Gill focused on the earnout. Krafton also said an early release would have disappointed players.
Krafton's stated reason for the firings shifted during the case. The court applied the mend-the-hold doctrine, which bars an employer from adding grounds it knew of but did not cite at termination. It also found the downloads did not meet the contract's dishonesty standard.
| Stage | Krafton's Stated Ground | Court's Finding |
|---|---|---|
| July 1, 2025 termination notices | Intention to proceed with a premature release of Subnautica 2 | No valid Cause shown |
| Trial position | Founders had effectively semi-retired and concealed it | Barred by mend-the-hold; role changes were disclosed and not dishonest |
| After-acquired evidence | Mass downloads of company files in June 2025 | Not an independent basis for termination under the Cause standard |
After the March 16, 2026 opinion, Krafton said it respectfully disagreed and was evaluating its options. Krafton later joined the settlement. Its statement said Unknown Worlds would keep leading Subnautica 2's development, with Krafton supporting the game's success.
Is the Subnautica 2 Lawsuit the Same as Unknown Worlds' Suit Against Its Founders?
No. The Subnautica 2 lawsuit is Fortis Advisors LLC v. Krafton, Inc., and a separate suit named Unknown Worlds Entertainment as plaintiff. Unknown Worlds filed that second suit against Cleveland, McGuire and Gill in the Delaware Court of Chancery on August 15, 2025. It alleged abandoned duties and file downloads.
| Proceeding | Parties | Subject | Reported Outcome |
|---|---|---|---|
| Fortis Advisors LLC v. Krafton, Inc. (this page) | Former Unknown Worlds shareholders v. Krafton | Firings, operational control and the earnout | Phase One opinion March 16, 2026; settlement reported July 1, 2026 |
| Unknown Worlds v. Cleveland, McGuire and Gill | Unknown Worlds Entertainment v. its three founders | Alleged abandonment of duties and company file downloads | Filed August 15, 2025; covered by the reported settlement |
No docket entry confirming dismissal of either case was reviewed for this page. Readers who need a certified status should check the Delaware Court of Chancery docket.
Frequently Asked Questions
What is the Subnautica 2 lawsuit about?
The Subnautica 2 lawsuit is about whether Krafton wrongly fired Unknown Worlds' leaders to avoid a $250 million earnout. Fortis Advisors LLC, representing the studio's former shareholders, sued Krafton in Delaware on July 10, 2025.
Is the Subnautica 2 lawsuit a class action?
No. The Subnautica 2 lawsuit is not a class action or multidistrict litigation. One seller representative sued one company, so no class of claimants exists to join.
Who won the Subnautica 2 lawsuit?
Fortis won the Subnautica 2 lawsuit's Phase One ruling on March 16, 2026, when the court found Krafton breached the acquisition agreement. The case then settled, according to a July 1, 2026 Bloomberg report, so no final judgment on damages followed.
Did Krafton use ChatGPT in the Subnautica 2 lawsuit?
Krafton's CEO used ChatGPT while planning the actions at the center of the Subnautica 2 lawsuit, according to the court's findings. The chatbot first said the earnout would be difficult to cancel, and he later formed the Project X task force.
How much is the Subnautica 2 lawsuit worth?
The Subnautica 2 lawsuit was worth up to $250 million in earnout money, plus any damages. The settlement's terms are not public, and the final amount paid has not been confirmed.
Was Ted Gill reinstated as Unknown Worlds CEO?
Ted Gill was reinstated as Unknown Worlds CEO on March 16, 2026 by court order. He stepped down voluntarily after the July 2026 settlement, and he told Bloomberg that a successor from outside both companies would be sought.
Is Subnautica 2 still available after the lawsuit?
Subnautica 2 is still available after the lawsuit. It launched in early access on May 14, 2026 for PC and Xbox Series X|S, and Unknown Worlds continues to release updates.
Does Krafton still own Unknown Worlds after the Subnautica 2 lawsuit?
Yes. Krafton still owns Unknown Worlds after the Subnautica 2 lawsuit, and no sale of the studio has been reported. The court restored contractual control rights to Gill, but the ruling did not change ownership.