Krafton Turns Up the Heat in Subnautica 2 Legal Battle

The fight over Subnautica 2 is getting even messier. Krafton is now claiming in a new court filing that former Unknown Worlds leaders Charlie Cleveland, Ted Gill, and Max McGuire wanted to push an unfinished game into Early Access just to trigger a massive payout, while also secretly downloading confidential company data. The publisher says it has put $500 million into the future of the Subnautica franchise — not just Subnautica 2, but also potential Subnautica 3, 4, and beyond — and wasn’t about to risk it on what it calls a rushed, damaging release.

This latest legal move adds more fuel to the already tangled drama between Krafton and the trio it fired in July. The former leaders have their own lawsuit, claiming Krafton deliberately delayed Subnautica 2 to avoid paying them a $250 million bonus that was part of the 2021 acquisition deal. Krafton’s side, however, paints a picture of abandonment, misplaced priorities, and a scramble for cash.

Krafton says Cleveland, Gill, and McGuire were brought on board as the “visionaries” of Unknown Worlds, with a huge financial incentive to meet ambitious revenue targets by June 2026. The idea was that they would keep operational control after the acquisition, lead Subnautica 2’s development, and ensure the game’s success while protecting Krafton’s large investment. Initially, Subnautica 2 was set for release in early 2024.

According to the court filing, the plan began to unravel when the developers allegedly lost interest in the project. Krafton claims Cleveland and McGuire stepped back from their key roles to focus on personal projects — even films — while Gill focused solely on getting his payout. By mid-2023, internal conversations reportedly revealed that staff noticed this lack of involvement, with some wondering why two of the studio’s most important figures had “checked out.”

Krafton’s allegations continue with direct quotes: Cleveland allegedly admitted in 2024 and 2025 that he was “not actually working on Subnautica,” while McGuire said he was working on projects outside the company’s main focus. With Gill left steering the project alone, Krafton says delays piled up and the game’s quality suffered.

By spring 2025, Krafton claims its internal assessments showed Subnautica 2 didn’t have enough content for Early Access. The publisher warned that rushing the release could cause “irreversible harm” to the brand, comparing it to the troubled launch of Kerbal Space Program 2. But, according to Krafton, the fired leaders insisted on releasing it anyway, motivated entirely by meeting their earn-out deadline.

The court filing goes further, alleging the trio pushed to self-publish without Krafton’s support and secretly downloaded large amounts of confidential data, breaking the acquisition agreement. Krafton says their focus was “singularly driven by self-interest” and that conversations over the years made it clear their priority was securing the payout, not making a quality game.

One passage cites a 2022 employee remark that “Ted will concoct a scheme to get us that earnout,” despite delays. Krafton’s legal team argues the three were willing to harm the company’s reputation for personal gain, something the publisher says it couldn’t risk after investing half a billion dollars into the franchise’s long-term future.

That’s why, according to Krafton, Cleveland, Gill, and McGuire were removed from their roles. The company insists the decision was about protecting the game, not avoiding payments.

Steve Papoutsis, the new CEO of Unknown Worlds and a former leader at Striking Distance (The Callisto Protocol), has already addressed the controversy. In an earlier interview, he said the leadership changes were not about money, but about maintaining a “commitment to players” and ensuring that any Early Access launch would meet expectations.

This isn’t the first major development in this story. In previous reports, Krafton Accuses Subnautica 2’s Former Leaders of Betrayal and Abandonment and Krafton Says Subnautica 2 Delay Proves It’s Managing Things Right, the publisher has maintained that delays are a sign of responsible project management, not financial scheming. With both sides standing firm, the dispute shows no signs of ending soon, and Subnautica 2’s future remains caught in the middle.