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The drama between Subnautica 2 publisher Krafton and ousted Unknown Worlds leadership is reaching a fever pitch in a new lawsuit filing accusing the former developers of seeking to release an unfinished game into Early Access purely to make sure they get a massive payout.
If you've been following this increasingly complex and messy story, you'll know there's a lot more to the sudden firing of former Unknown Worlds leads Charlie Cleveland, Ted Gill, and Max McGuire in July than what first appeared on the surface, and accounts differ wildly depending on who you ask.
In a lawsuit filed against Krafton, the trio accuses the publisher of delaying Subnautica 2 to avoid having to shell out a $250 million payout that was stipulated at the time of its $500 million acquisition of Unknown Worlds.
Defending itself in a newly public court filing (via Krafton says Cleveland, Gill, and McGuire abandoned their positions years before the suit and lays the blame for Subnautica 2's unfinished state and delay squarely at their feet.
"Rather than investing the effort necessary to meet the earn-out conditions they freely negotiated, [Cleveland, McGuire, and Gill] have resorted to litigation to demand a multimillion-dollar payday they haven't earned," Krafton alleges.
Krafton says Cleveland, McGuire, and Gill were presented as "the visionaries behind Unknown Worlds' success and the key to its future," and so in order to "keep them invested" in the studio's growth, it offered the aforementioned payout as incentive to hit "ambitious revenue targets" by June 2026. The filing notes that Unknown Worlds originally planned to release Subnautica 2 in the first quarter of 2024.
The plan, according to Krafton, was to have Cleveland, McGuire, and Gill retain "operational control" of Unknown Worlds post-acquisition and for Cleveland and McGuire, in particular, to lead development on the sequel as the creators of the original game "subject to certain conditions" aimed at protecting Krafton's "extraordinary investment" in the project.
Instead, Krafton alleges, "the plan quickly unraveled" when the developers "lost interest in developing Subnautica 2." Krafton accuses Cleveland and McGuire of abandoning their positions as game director and technical director so that they could "focus on their personal passion projects and quit making games for Unknown Worlds entirely," and accuses Gill of focusing solely on getting his payout instead of "developing a successful game."
Krafton says that Cleveland and McGuire's alleged absences started impacting Subnautica 2's development by July of 2023, when the game's development director allegedly told Gill, "folks think ... Max and Charlie are checked out and are confused as to why."
Krafton quotes Cleveland as saying in 2024 and 2025 that he "was not actually working on Subnautica [2]" and "was no longer working on games, but [ ] working on a couple films." Meanwhile, McGuire is quoted as saying he had begun work on projects that "fall outside of [the Company's] main development activities." Krafton says that, with Gill leading the ship as president and CEO without help from Cleveland and McGuire, Subnautica 2 "suffered developmental delays."
Keeping in line with previous statements, Krafton again says its own internal assessments of Subnautica 2 demonstrated that there wasn't enough content for an Early Access launch, leading to delays, and in spring 2025 "things fully veered off course" when Krafton told Unknown Worlds the game wasn't ready for release and that "a premature Early Access release of a highly anticipated sequel like Subnautica could cause irreversible harm to the entire IP franchise—pointing to the sequel to Kerbal Space Program as a prime example."
You can see where this is going. Cleveland, McGuire, and Gill claim Krafton delayed Subnautica 2 to deny a payout, and Krafton counter-claims that Cleveland, McGuire, and Gill wanted to release an unfinished game so that they could line their pockets. This new document goes on to say the trio was "desperate" to meet revenue targets and "insisted on moving forward with a premature" Early Access launch to get their payouts.
Krafton further alleges that Cleveland, McGuire, and Gill pushed to self-publish the game without Krafton's support and says they "secretly downloaded massive amounts of confidential information from Unknown Worlds in further violations of the [purchase agreement]."
"The Key Employees' insistence on releasing the game immediately was singularly driven by self-interest in obtaining the earnout," Krafton claims. "At every turn during development, the Key Employees were laser focused on avoiding 'a timeline that doesn't tank the earnout opportunity' and scheduling the release to maximize their payments.
"Conversations throughout the post-acquisition period make clear the Key Employee's focus was on their payday, and not on the game. As early as 2022, an employee who was due to receive a portion of the earnout stated that despite the significant delays in the game, he was confident 'Ted [Gill] will concoct a scheme to get us that earnout." (Stylized per the court document.)
Krafton claims Cleveland, McGuire, and Gill were willing to release a game that "would damage the Company's goodwill" so they could maximize their payouts, "but Krafton was not willing to take the risk" with $500 million "invested in the success of not only Subnautica 2, but also Subnautica 3, Subnautica 4, and any other future Subnautica franchise product." Krafton says that's why it fired Cleveland, McGuire, and Gill.
For his part, new Unknown Worlds CEO Steve Papoutsis, who joined the company from The Callisto Protocol studio Striking Distance, recently told GamesRadar+ the leadership shakeup had nothing to do with money and that, from his perspective, it was all about a "commitment to players, a commitment to the creative process, a commitment to ensuring that, when we do choose to go to Early Access, it meets players' expectations."
