Krafton fires back at Unknown Worlds lawsuit, says Subnautica 2 was at risk of causing 'irreversible harm to the entire franchise' like Kerbal Space Program 2

Krafton has filed a response to the lawsuit brought against it by the former heads of Subnautica studio Unknown Worlds, accusing them of almost immediately abandoning their responsibilities following Krafton's acquisition of the studio despite repeated efforts to keep them onboard. The publisher is requesting an outright dismissal of the lawsuit filed against it and all claims for relief, along with legal fees and other costs.

The dispute between Krafton and the former leadership of Unknown Worlds—co-founders Charlie Cleveland and Max McGuire, and studio CEO Ted Gill—came to public light in July when the trio were dismissed, but Krafton's filing points to problems going back almost to the very beginning. Cleveland, McGuire, and Gill "were presented to Krafton as the visionaries behind Unknown Worlds' success and the key to its future," it says, and so Krafton put a lot of money into keeping them around: $500 million to buy the studio, plus up to $250 million more if "they led the successful development of Subnautica 2 and other games and hit an ambitious revenue target in four consecutive quarters before June 2026."

That payout is the crux of the beef: The former Unknown Worlds bosses accuse Krafton of delaying Subnautica 2 in order to avoid that payout, but Krafton says the game simply wasn't ready for release, even in early access, in large part because the studio heads let their attention wander to other things following their big paydays. Krafton went deeper into those claims in today's filing.

"Having sold the company, Cleveland and McGuire, who pocketed almost $200 million apiece from the sale, and Gill, who received $60 million, quickly lost interest in development Subnautica 2," Krafton's formal response to the lawsuit states. "Cleveland and McGuire abandoned their roles as studio-wide game director and technical director to focus on their personal projects and quit making games for Unknown Worlds entirely. And Gill, who remained, focused on leveraging his operational control to maximum the earnout payment, rather than develop a successful game.

"By July of 2023, Cleveland and McGuire's absence at Unknown Worlds had begun to impact the Subnautica 2 development team. The development director at Unknown Worlds told Gill that 'folks think ... Max and Charlie are checked out as studio heads and are confused as to why.' In reality, Cleveland had abandoned videogames to pursue filmmaking, a process he documented publicly on his website and on social media.

"For his part, McGuire started 'working on initiatives that fall outside of [the company's] main development activities,' stating that his priority was to 'try something that feels personally meaningful to me.' Gill remained as Unknown Worlds' president and CEO. But without the original creators, Subnautica 2 suffered serial developmental delays under his watch."

Krafton claims that problems with Subnautica 2 came to light in an internal assessment in March 2024, but rather than getting down to work, studio leadership "blamed others and overhauled the team," and "continued to reduce the scope of the game" as the release continued to be delayed. By the spring of 2025, Krafton felt the game was still far from ready for early access: The suit says CEO Changhan Kim worried that Subnautica 2 could end up like Kerbal Space Program 2, causing "irreversible harm to the entire IP franchise."

"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," the filing states. "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."

The bulk of the response is a line-by-line answer to the lawsuit filed by the former Unknown Worlds bosses, which gets into painfully tedious detail: Regarding the very first sentence in the very first paragraph of the lawsuit, for instance, Krafton acknowledges acquiring Unknown Worlds but denies the claim that the studio was "wildly successful." It's all very lawyerly, in other words, but the net result is a legally comprehensive restating of the defense Krafton has put up all along: Subnautica 2 isn't ready for the light of day, and the former Unknown Worlds bosses were willing to put it out anyway just to collect a cheque.

"We believe the facts speak for themselves," the company said in a separate statement. "This answer reflects our commitment to protecting both the Subnautica IP and the global community that has supported it for years."

This is usually the point at which the lawyers close the doors and get to work on hammering out some sort of agreement ahead of a trial, a process that can take months or years to conclude and is typically done in silence—in other words, we may not be hearing much more about this dispute until it's over. As for Subnautica 2, it doesn't have a new early access release date at this point, but is now not expected to be out until sometime in 2026.