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Reported The Amplifier Costly
Delaware Chancery finds Krafton’s ChatGPT-aided earnout “takeover” pretextual
Krafton acquired Unknown Worlds Entertainment in 2021 for $500 million upfront plus up to $250 million in contingent earnout payments, with contractual promises that founders Charlie Cleveland and Max McGuire and CEO Ted Gill would retain operational control and could be fired only for cause. As Subnautica 2 neared release and internal projections pointed toward triggering the earnout, Krafton CEO Changhan (CH) Kim consulted ChatGPT about canceling or navigating the earnout. The chatbot told ...
A buyer used a general-purpose chatbot as strategic counsel for an earnout-avoidance “takeover,” then acted on the bot’s pressure-and-control recommendations — amplifying AI guidance into corporate control moves that Chancery later treated as evidence of pretext.
Krafton acquired Unknown Worlds Entertainment in 2021 for $500 million upfront plus up to $250 million in contingent earnout payments, with contractual promises that founders Charlie Cleveland and Max McGuire and CEO Ted Gill would retain operational control and could be fired only for cause. As Subnautica 2 neared release and internal projections pointed toward triggering the earnout, Krafton CEO Changhan (CH) Kim consulted ChatGPT about canceling or navigating the earnout. The chatbot told him the earnout would be “difficult to cancel,” then supplied a “Response Strategy to a ‘No-Deal’ Scenario.” At ChatGPT’s suggestion, Kim formed an internal task force dubbed “Project X,” aimed at negotiating a deal on the earnout or executing a “Take Over” of the studio. (opinion)
Over the following weeks, Krafton followed much of that playbook: it locked Steam publishing rights so Unknown Worlds could not release Subnautica 2; unilaterally posted a message on Unknown Worlds’ and Subnautica websites; and terminated Cleveland, McGuire, and Gill. After Fortis Advisors sued on behalf of former Unknown Worlds stockholders, Krafton shifted justifications for the firings. In a Phase One post-trial opinion dated 16 March 2026, Vice Chancellor Lori W. Will found the terminations pretextual, held that Krafton breached the equity purchase agreement by firing the Key Employees without valid Cause and by improperly seizing operational control, and ordered Gill reinstated as CEO with operational authority. The court equitably extended the base earnout Testing Period by 258 days (to 15 September 2026), ordered Steam access restored to Gill, and reserved money-damages / earnout-impairment questions for Phase Two. ChatGPT exchanges entered the trial record (including exhibits quoting the No-Deal strategy) and feature prominently in the opinion; Kim admitted at trial that he had deleted specific, relevant ChatGPT logs. (opinion)