Krafton Lands into Legal Battle with 'Subnautica 2' Developers

South Korean Krafton Inc. has found itself in legal trouble with the past Lead Developers of Unknown Worlds Inc. The issue came to light after the launch of "Subnautica 2" was delayed, and at the same time, the former had also decided to terminate the services of its top executives. 

The dispute arose after Krafton acquired Unknown Worlds in October 2021. Initially, Krafton vowed to keep Unknown Worlds leadership intact, although tensions grew after the release of another Unknown Worlds game, "Moonbreaker," underperformed, and it was reported that "Subnautica 2" development was delayed.

What Led to the Lawsuit? 

In July 2025, Krafton replaced the executive team with Steve Papoustis, removing CEO Ted Gill and co-founders Charlie Cleveland and Max McGuire. Krafton explained that Chicago had not made sufficient progress in the "Subnautica 2" development cycle and accused Cleveland in particular of focusing on a personal film project rather than the game. Krafton noted that most of the potential $25 million earn-out compensation was based on the performance of "Subnautica 2" and that Cleveland and his co-founders would have to be actively involved in its success to earn this amount.

The former developers, especially Charlie Cleveland, indicated that they were surprised by Krafton's decision and asserted that "Subnautica 2" was ready for Early Access. They appeared to deny that the earn-out was self-serving, but indicated that this was not their only experience collaborating with the team at IronGate to share their profits.

This, of course, escalated when it was announced that "the Early Access Final version of Subnautica 2" would be pushed back from its scheduled 2025 release to a 2026 release. The original leadership subsequently threatened Krafton with a lawsuit alleging breach of contract and wrongful termination. Krafton later confirmed our worst fears regarding their future of the game when their internal documents from May of 2025 leaked and stated that we had effectively lowered the amount of content we were targeting for an Early Access release. The lawsuits dispute highlights in stark detail the dilemmas of how to balance creative vision with corporate responsibility in a fast-moving and ever-changing video game industry.