In a bizarre turn of events that reads like a corporate satire, the CEO of South Korean gaming giant Krafton has learned an expensive lesson about the limits of artificial intelligence. Changhan Kim, helming the company behind the popular PUBG battle royale, turned to ChatGPT for legal advice on how to avoid paying a $250 million contract—only to suffer a crushing defeat in Delaware courts.
The Acquisition and the Earnout
In 2021, Krafton acquired Unknown Worlds Entertainment, the San Francisco-based studio renowned for the Subnautica series, for $500 million upfront. However, the deal included a significant contingent component: up to $250 million in additional payments tied to the performance of Subnautica 2. This type of earnout arrangement is common in acquisitions, designed to align the interests of both parties by rewarding the acquired company based on future performance.
As development of Subnautica 2 progressed, internal sales projections painted a rosy picture. Financial models suggested the game would likely trigger an earnout payment between $191.8 million and $242.2 million—figures that apparently gave CEO Kim significant pause.
Turning to AI Instead of Lawyers
Facing the prospect of a massive bonus payment, Kim made a decision that would prove disastrously shortsighted: he turned to ChatGPT for legal advice on how to void the contract. Despite having access to experienced corporate lawyers and legal advisors, Kim chose to rely on an AI chatbot for guidance on one of the most critical financial decisions in the company’s history.
Court documents revealed that over the course of about a month, Krafton followed “most of ChatGPT’s recommendations” instead of advice from their legal team. The AI apparently provided strategies that included restricting Unknown Worlds’ ability to release Subnautica 2 on Steam—the game’s primary distribution platform—and preparing “systematic material for legal defense.”
The Corporate Coup and Legal Fallout
In July 2025, Krafton executed what could only be described as a corporate coup. The company fired Unknown Worlds’ leadership team, including CEO Ted Gill and co-founders Charlie Cleveland and Max McGuire, effectively taking control of the studio and delaying Subnautica 2‘s release. Krafton’s stated reasons for these firings shifted over time, initially claiming the team had failed to get the game ready for timely launch.
The dismissed executives weren’t going quietly. They filed a lawsuit alleging that Krafton had violated their contract and deliberately delayed the game to avoid triggering the earnout payments. This legal action would ultimately expose the full extent of Krafton’s reliance on AI for legal strategy.
Justice Served, AI Found Wanting
On March 16, 2026, Delaware Court of Chancery Vice Chancellor Lori W. Will delivered a decisive ruling against Krafton. The court ordered the company to reinstate Ted Gill as CEO and return operational control of Unknown Worlds and Subnautica 2. In her opinion, Will found that Krafton had breached the Equity Purchase Agreement by terminating key employees without valid cause and improperly seizing operational control.
The ruling didn’t stop there. The court extended the earnout window into 2026-2027, effectively ensuring that Krafton would still have to make the substantial payments they were trying to avoid. Further litigation remains pending to determine exact damages.
AIPocalypse for Krafton
This legal debacle came at a particularly ironic time for Krafton. The company had announced its “AI First” strategy just months earlier, in October 2025, committing approximately $70 million to build a GPU cluster infrastructure. The initiative was meant to position Krafton at the forefront of gaming’s AI revolution, automating workflows and implementing an “AI-centric” management system.
Instead, the company’s ill-advised use of ChatGPT for critical legal decisions has become a cautionary tale for businesses rushing to embrace AI technologies. As the McNeely law firm notes, AI implementation in business decision-making raises complex intellectual property questions and potential liability issues that companies must carefully navigate.
Krafton’s approach demonstrates the significant risks that arise when companies rely on AI for legally sensitive matters without proper oversight or understanding of the technology’s limitations. ChatGPT, like other large language models, can “hallucinate” false information and lacks the professional judgment required for complex legal strategy.
Corporate Response and Moving Forward
In a brief statement following the ruling, Krafton indicated they were “evaluating our options as we determine our path forward,” while maintaining that they “put players at the heart of every decision.” However, the company’s actions suggest that their priorities may have been misaligned with both contractual obligations and corporate governance best practices.
Despite the legal turmoil, Subnautica 2 remains on track for a May 2026 early access release on PC and Xbox, with Ted Gill back at the helm of Unknown Worlds Entertainment.
Broader Implications
This case has broader implications for corporate governance in the age of AI. As noted by experts in the American Bar Association’s analysis of AI cases, companies must understand that using AI doesn’t absolve them of responsibility for their decisions.
The legal profession is increasingly aware of both the potential benefits and risks of AI implementation. Thomson Reuters highlights that while generative AI can enhance legal work, it also introduces new legal risks that attorneys must understand and mitigate.
For Krafton, the consequences extend beyond the immediate financial implications. The company’s reputation has taken a significant hit, and questions remain about their internal decision-making processes. As businesses continue to integrate AI into their operations, this case serves as a reminder that human expertise and professional judgment remain irreplaceable—especially in matters with significant legal and financial stakes.
In the end, Krafton’s experiment with ChatGPT for legal advice may have cost them not just the $250 million earnout payment, but also the trust of their partners and the broader gaming community. It’s a costly lesson in the importance of combining AI tools with human judgment rather than replacing one with the other.
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