Krafton had restated claims that Unknown Worlds leaders Charlie Cleveland, Max McGuire, and Ted Gill were terminated for abandoning development on Subnautica 2 and alleges that all three execs have now “resorted to litigation to demand a multimillion-dollar payday they haven’t earned.”
The South Korean publisher repeated those allegations in response to the lawsuit tabled by the three ousted execs—who last month claimed Krafton “decided to go nuclear” to avoid paying a mammoth $250 million earnout tied to the success of the long-awaited sequel.
Cleveland, McGuire, and Gill claimed Subnatica 2 was primed for an early access launch in 2025, but was delayed by Krafton so the company wouldn’t have to hand over that earnout—which expires in 2026.
“The promise of such immediate and enormous success presented a problem for Krafton. Certainly, it eventually wants the game to drive revenue. But a blockbuster [redacted] launch—squarely within the earnout period—would likely trigger the $250 million earnout to the studio’s former owners and employees,” they said in their complaint.
Krafton disagrees. In a response filed on August 12 (shared on Scribd by Aftermath), the company acknowledges the dispute senates on the earnout (referred to as the Equity Purchase Agreement) but claims all three execs “quickly lost interest in developing Subnautica 2” shortly after Krafton acquired Unknown Worlds for $500 million in 2021.
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The company states that Cleveland and McGuire both “pocketed” around $200 million each from the sale, with Gill receiving $60 million. All three are accused of downing tools after receiving that cash.
“Cleveland and McGuire abandoned their roles as studio-wide Game Director and Technical Director to focus on their personal passion projects and quit making games for Unknown Worlds entirely. And Gill, who remained, focused on leveraging his operational control to maximize the earnout payment, rather than developing a successful game,” reads Krafton’s response.
Krafton says Unknown Worlds bosses were ‘willing to gamble’ on premature Subnautica 2 release to secure mammoth payout
Notably, Krafton says the trio’s absence began to materially impact the development of Subnautica 2, causing concern among the wider development team. It claims the development director at Unknown Worlds told Gill that people thought “Max and Charlie are checked out as studio heads” and were “confused” as to why.
In addition, Krafton states the development lead for Subnautica 2 said the first Early Access (EA) and second Early Access milestones (the latter of which was planned for December 2025) would only be around 12 percent of the team’s intended 1.0 scope. They are then said to have joked the game “would be in development for 30 years” at that rate.
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Krafton claims Cleveland, McGuire, and Gill “became desperate” as a result of those issues and realized they would miss out on the four quarters of consecutive revenue needed to maximize their earnout.
“Cognizant of this and faced with a choice between their own monetary interests and the best interests of Unknown Worlds and the Subnautica franchise, the Key Employees insisted on moving forward with a premature EA launch of Subnautica 2,” adds Krafton, before accusing all three of downloading “massive amounts of confidential information” in further violation of the Equity Purchase Agreement (EPA).
“The Key Employees (Cleveland, McGuire, and Gill), who had sold all their equity in the Company and were willing to gamble with the release of any game, even one that would damage the Company’s goodwill, in time for them to maximize their earnout at the expense of the Company,” continues Krafton’s response.
“But Krafton was not willing to take the risk of the resulting damage to the Subnautica franchise and the Company’s long-term reputation—a risk that, if materialized, would be irreversible, as shown with Kerbal Space Program 2. As Unknown Worlds’ sole stockholder, Krafton had invested $500 million in the success of not only Subnautica 2, but also Subnautica 3, Subnautica 4, and any other future Subnautica franchise product.
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“To prevent the Key Employees from permanently damaging Unknown Worlds’ most valuable IP, the Company itself, and its goodwill with its fans, and following conduct by the Key Employees that plainly gave rise to termination for Cause, Krafton terminated the Key Employees, consistent with the terms of both their employment agreements and the EPA.”
Krafton subsequently denied all allegations (unless expressly admitted) leveled against it in the complaint filed by Cleveland, McGuire, and Gill.
You can read the full lawsuit on Scribd.