In a highly unusual ruling blending corporate governance, contract law, and the real-world application of generative AI, Vice Chancellor Lori Will of the Delaware Court of Chancery ordered South Korean game publisher Krafton Inc. on Monday to immediately reinstate the ousted leadership of its U.S. subsidiary, Unknown Worlds Entertainment — the studio behind the acclaimed survival game Subnautica.
The decision stems from a bitter $250 million earnout dispute following Krafton’s 2021 acquisition of Unknown Worlds for $500 million upfront. The deal explicitly promised the studio’s founders and executives, including co-founders Charlie Cleveland and Max McGuire, and CEO Ted Gill, continued operational independence and protection from removal except for cause.
Additional earnout payments of up to $250 million were tied to performance milestones, which internal projections in mid-2025 indicated the studio was on track to achieve with the upcoming Subnautica 2. According to Will’s 68-page opinion, Krafton CEO Changhan Kim, concerned about being locked into a “pushover” deal, turned to ChatGPT in June 2025 for strategic advice on how to renegotiate or exit the earnout obligation. Over the following month, Krafton followed “most of ChatGPT’s recommendations,” the court found, including:
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- Forming an internal task force to negotiate a new deal or execute a takeover.
- Developing a communications strategy emphasizing fan trust.
- Preparing legal defense materials.
- Attempting to secure publishing rights over Subnautica 2.
When studio leadership refused to renegotiate, Krafton removed Gill, Cleveland, and McGuire in late 2025, alleging they had deceived the company by spending insufficient time at the studio. The court rejected that claim as pretextual, finding no evidence of cause for termination and determining the firings were motivated by the desire to avoid the earnout.
Will ruled that Krafton breached the acquisition agreement and ordered immediate reinstatement of Gill as CEO with full operational control restored. She also extended the earnout measurement period to give the studio additional time to meet performance targets.
Krafton responded in a statement that it “disagrees with the ruling” and is “evaluating its options” while remaining “focused on delivering the best possible game for fans.” The company emphasized it is “working tirelessly” to strengthen Subnautica 2 ahead of its planned early-access release.
Unprecedented Judicial Commentary on AI Use in Corporate Decision-Making
The ruling is believed to be the first U.S. court decision to explicitly examine and criticize a corporate executive’s reliance on a generative AI tool for high-stakes strategic advice in a control dispute. Will’s opinion described ChatGPT’s involvement as part of a “systematic” effort to circumvent contractual commitments, noting that the chatbot’s suggestions were treated with a level of deference that appeared to bypass traditional legal and business judgment processes.
The case has drawn immediate attention from corporate governance scholars, AI ethics researchers, and litigators who see it as a harbinger of future disputes in which AI-generated advice intersects with fiduciary duties, contractual obligations, and board-level decision-making.
The dispute highlights the tension between acquirers seeking flexibility and founders seeking protection in earnout-heavy deals — a structure common in tech and gaming M&A. It also underscores the growing pains of integrating AI tools into formal corporate strategy processes. While ChatGPT and similar models are widely used for brainstorming and research, their outputs lack legal accountability, contextual nuance, and fiduciary awareness — limitations the court implicitly recognized in finding Krafton’s reliance unreasonable.
For Krafton, the ruling is a costly setback. Beyond reinstatement and potential earnout liability, the public nature of the decision — including detailed excerpts of ChatGPT’s recommendations — may damage reputational capital in the global gaming community and complicate future M&A.
The case also arrives amid heightened regulatory and public scrutiny of AI’s role in business and society. U.S. lawmakers have introduced targeted bills on AI training data, deepfakes, and copyright, while the EU’s AI Act and other frameworks impose stricter obligations on high-risk systems. The Krafton ruling may fuel calls for clearer guidelines on AI use in corporate governance and fiduciary contexts.
As Subnautica 2 prepares for early access, the reinstated leadership will now attempt to deliver under the original deal terms.