Back in July 2025, game publisher Krafton conducted one of the worst layoffs in video game history. Subnautica developer Unknown Worlds was removed to prevent a $250 million payout for Subnautica 2. After 9 months of investigation and trial proceedings, Krafton is ordered to reinstate former Unknown World’s senior team, including CEO Edward “Ted” Gill. Despite the Delaware court’s decision, publisher CEO Changham Kim continues to hold disagreements.
What did Unknown Worlds Sue for?
Gill and his colleagues, game designer Charlie Cleaveland and technical director Max McGuire, were suddenly replaced on Jul. 2, 2025. Krafton announced that The Callisto Protocol‘s chief development officer, Steve Papoustis, would lead Subnautica 2’s development instead. No reason was given for their departure until reports of the publisher’s incompetence began to surface.
On Jul. 10, the layoff situation was discovered to be linked with an acquisition purchase and a $250 million payout. Kim, who was addressing the information, lied that Unknown Worlds’ leaders abandoned the sequel for profit.
He told the media, “Specifically, in addition to the initial $500 million purchase, we allocated 90% of the up to $250 million earn-out compensation to [Gill, Cleaveland, and McGuire], with the expectation that they would demonstrate leadership and active involvement in the development of Subnautica 2. However, regrettably, the former leadership abandoned the responsibilities entrusted to them.”
Bloomberg reported that Unknown Worlds’ former senior team filed a complaint to the Delaware Chancery Court on the same day. Then on Jul. 16, the documents were made public, with Gill and his partners alleging that Kim used pressure tactics to insinuate a ploy to delay the underwater adventure game’s beta release.
The Krafton CEO kept on reinstating their motive as “project abandonment for profit” until the lawsuit’s pre-trial on Nov. 17. Kim soon admitted that the Unknown Worlds layoff was to avoid paying the developers, including an additional $25 million bonus. He sullied his case by confessing he consulted legal advice from ChatGPT.
Furthermore, Slack messages revealed he was participating in a secret takeover plan called ‘Project X’ with Unknown World’s two-year appointed CFO Richard Yoon. Their discussion dates back to Jun. 26. These two attempted to pay the Subnautica 2 team less than what was promised. They received rejections and were required to cooperate if both the senior and development teams were together.
Ted Gill Will Return for Subnautica 2
Fast forward to the official proceedings that began on Jan. 9, 2026, law firm Fortis Advisors represented Gill, Cleaveland, and McGuire. The arguments and statements highlighted a majority of what the public was informed, including the fractured relationship between Krafton and Unknown Worlds. On Mar. 16, the Delaware Chancery Court concluded that the senior team should be reinstated since Kim breached the Equity Purchase Agreement based on three factors.
Fortis Advisors identified that the South Korean publisher lacks adequate remedies. The court explained, “The Key Employees’ right to operational control over Unknown Worlds was a crucial, bargain-for protection. It guaranteed that [they] had a long period of authority over the studio, including ‘project roadmap, launch, and planning.’
Krafton stripped [the senior team] of this control by wrongfully terminating them, which deprived them of the freedom to guide Unknown Worlds consistent with their vision. The loss of such control, including over the launch of Subnautica 2, constitutes irreparable harm. The text of the EPA bolsters this conclusion.”
Then, the law firm and the court agreed that Kim lied about Unknown Worlds’ lack of preparedness for the awaited sequel. Cleaveland was exploring film adaptation while McGuire was researching video games affecting children with autism. Both founders have contributed to mentoring and directing the Subnautica 2 team, despite stepping back at times.
As for Gill, he oversaw, managed, budgeted, and drove business development. He serves as the primary liaison of Unknown Worlds. His work effort also received no complaints, which contradicts Krafton’s previous statements. “Krafton’s executives levied no complaints about his dedication or performance, and internal communications even explored keeping Gill while ousting the others.”
Finally, Kim’s endeavors for Project X have jeopardized Subnatica 2’s early launch due to breaking the balance of equity. He believed Gill’s positive reinforcement would only slow down the project’s development. The Krafton CEO refused to accept the reality that he had already tainted the publisher and terrified the Unknown Worlds’ staff.
Gill will be returning as Unknown World’s CEO and will momentarily continue overseeing Subnautica 2’s development. The Delaware Court ruled that the EPA’s Section 2.7 will grant him an extension on his earnout deadline set for Sept. 15, 2026. The game testing period also receives an extension up to March 15, 2027. Fortis Advisors has requested that Cleaveland and McGuire have their positions reinstated as well.
