The dispute between KRAFTON and former executives of its U.S. subsidiary Unknown Worlds is intensifying. The former executives, comprised of founding members of Unknown Worlds, claimed that "KRAFTON fired us to avoid paying a performance bonus of $250 million (approximately 340 billion won)."
According to Bloomberg News on the 16th (local time), Ted Guild, former chief executive officer (CEO) of Unknown Worlds, along with co-founder Charlie Cleveland and Max McGuire, who recently filed a lawsuit claiming KRAFTON breached a contract, stated, "After Unknown Worlds presented a positive performance outlook, KRAFTON delayed the release of the new title 'Subnautica 2' and fired the executives to avoid paying bonuses."
KRAFTON acquired the game developer Unknown Worlds, known for its popular game 'Subnautica', for about $500 million (approximately 580 billion won) in 2021. At the time of the acquisition, KRAFTON stated that if Unknown Worlds developed and released the sequel 'Subnautica 2' within the year and achieved certain revenue targets, about $250 million (approximately 340 billion won) in performance bonuses (earn-out) would be paid to executives and employees. However, KRAFTON recently postponed the release of 'Subnautica 2' to next year and abruptly replaced its executives.
According to the filed complaint, KRAFTON proposed a lower compensation plan before firing the three former executives.
The complaint reveals that the relationship between the two sides was smooth until early this year, but conflicts arose when former CEO Guild discussed plans to grant bonuses to employees who could not receive performance bonuses according to the original acquisition terms. Most of the 40 employees hired at the time of the Unknown Worlds acquisition were supposed to receive performance bonuses, but it is reported that the executives wanted to provide bonuses to employees who joined later.
The founding members stated in the complaint that "KRAFTON's executives changed their stance after reviewing the performance projections and the scale of bonuses presented by CEO Guild at the time." Following this, KRAFTON began to argue that it had to delay the release of 'Subnautica 2', and some KRAFTON employees reportedly told CEO Guild that "the company is trying to avoid paying bonuses."
According to the complaint, during a lunch meeting, Kim Chang-han, CEO of KRAFTON, told Cleveland, "Releasing the game in 2025 could incur significant financial losses and harm the company's image." Following this, KRAFTON explained that the comment was a "mistranslation," Bloomberg reported.
The conflict between the two sides continued for two months from May to June. Founding members of Unknown Worlds claimed that during this period, KRAFTON stopped providing publishing-related support, such as marketing and outsourcing costs, which led to missed promotional opportunities for the new title set for summer release.
The relationship between KRAFTON and the executives of Unknown Worlds completely soured by the end of June. At that time, KRAFTON demanded that the executives accept a lower bonus payment plan. CEO Kim Chang-han wrote in a letter sent to them that the development of 'Subnautica 2' was slow and did not meet expectations, indicating that the executives had not fulfilled their responsibilities.
Ultimately, KRAFTON fired three executives earlier this month and appointed Steve Papoutsis, a former chief development officer (CDO) of its North American subsidiary, Striking Distance Studios, as the new CEO of Unknown Worlds.
Bloomberg noted that whether 'Subnautica 2' was sufficiently complete to be released as early access this year will be a key issue in the lawsuit. According to internal review materials reviewed by Bloomberg, KRAFTON cited feedback from internal testers, stating that "the game lacks content and has low innovation."
KRAFTON stated, "While we expected the three former executives of Unknown Worlds to actively participate in the development of 'Subnautica 2' and demonstrate leadership, allocating about 90% of the performance bonuses, they neglected development to focus on personal film production projects."
On the other hand, the former executives who filed the lawsuit presented a conflicting argument that "'Subnautica 2' received high evaluations in tests involving hundreds of participants."
A KRAFTON official stated, "Rushing to release a sequel with insufficient content that does not meet expectations could disappoint fans and harm both the 'Subnautica' and Unknown Worlds brands."
He added, "We regret that Charlie, Max, and Ted have filed a lawsuit demanding huge financial compensation, but we will actively clarify KRAFTON's position in court, and until then, KRAFTON will focus on making 'Subnautica 2' the best game possible."