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The development of Subnautica 2, a highly anticipated follow-up to the indie smash hit Subnautica, which sold over five million copies only two years after release, has become entangled in one of the most contentious and public legal dramas the games industry has seen in recent years.
On one side is KRAFTON, the South Korean publisher best known for PUBG. On the other are the founders of Unknown Worlds Entertainment (UWE), the studio behind Subnautica.
What started as a high-profile acquisition promising creative freedom and collaboration has since unraveled into a bitter conflict involving delayed milestones, a disputed $250 million earn-out, and an impending lawsuit.
The Acquisition and the Earn-Out Deal
KRAFTON acquired Unknown Worlds in 2021. According to KRAFTON’s own statement published as a pop-up on their homepage around July 10, 2025, the purchase included an initial $500 million payment. Additionally, a further up to $250 million in performance-based earn-out compensation was made part of the deal.
KRAFTON states that around 90% of this $250 million was allocated to three former executives of Unknown Worlds: Charlie Cleveland (studio co-founder), Max McGuire, and one unnamed third party.
These funds were to be distributed if certain revenue milestones were hit by the end of 2025, and were contingent upon the successful Early Access release and commercial performance of Subnautica 2.
This kind of earn-out structure is not uncommon in acquisitions, especially when key creative talent is expected to stay on and help ship a sequel to a successful franchise. The implicit idea is: the founding team will remain deeply involved, and if the game hits specific financial targets, everyone wins, especially the founders, who in this case stood to earn $250 million collectively.
What Went Wrong?
In July 2025, KRAFTON published a strongly worded public statement alleging that the Subnautica 2 project had stalled due to abandonment by former leadership. The company specifically named Charlie Cleveland and Max McGuire, saying they refused multiple requests to resume their roles as Game Director and Technical Director, respectively.
KRAFTON claims that after the commercial failure of Moonbreaker (a game released by Unknown Worlds in 2022) Charlie Cleveland was asked to refocus his attention on Subnautica 2. Instead, they say, he devoted himself to a personal film project.
KRAFTON directly linked this lack of executive leadership to internal confusion, missed development milestones, and an Early Access build that “falls short in terms of content volume.” The company said it felt a “profound sense of betrayal” by the former leadership’s conduct.
Shortly after this statement, Charlie Cleveland and the other founders reportedly initiated legal proceedings against KRAFTON, although the specific details of the lawsuit are not yet public.
According to Reddit posts referencing statements made by Cleveland, he believes the game was in a state that justified an Early Access release, something that would have made the bonus payout more likely to be triggered under the existing agreement. KRAFTON, however, delayed the Early Access launch until 2026, putting it past the deadline for revenue targets that would unlock the earn-out.
Many fans and commenters have speculated this delay may have been intentional to avoid the payout, though there is currently no direct evidence to confirm that.
Public Backlash and Community Speculation
The community response has been predictably divided. Some fans immediately accused KRAFTON of corporate sabotage by delaying a nearly complete game to avoid paying $250 million in bonuses.
Others believe that the former executives may have been disengaged or negligent, especially given the shift of attention toward unrelated personal projects like Cleveland’s AI-assisted Christmas comedy film project, Nutmeg & Mistletoe. The film’s website, found at abyssal.co, includes AI-generated concept art and a podcast titled “Movie In The Making,” which some Redditors saw as ironic or tone-deaf given the Subnautica 2 controversy.
The situation became even murkier as more Reddit commenters surfaced claims that Unknown Worlds had a long-standing culture of revenue sharing with their employees, even from earlier profits and parts of the original buyout. One user claimed the team had split profits from the $500 million KRAFTON deal in a tiered structure based on tenure. However, these claims are anecdotal and not supported by public documentation.
What is confirmed is that the $250 million bonus was overwhelmingly allocated to the top three executives. This has led many to question whether claims of intended profit-sharing from the earn-out are now just retroactive PR.
Legal Risks and Corporate Reputation
What stands out in KRAFTON’s response is its unusually aggressive tone. It is rare for large publishers to publicly single out specific individuals, especially former partners, by name. Legal and PR teams tend to advise against this due to potential defamation risks. The fact that KRAFTON went ahead with such a statement suggests that it either feels legally confident in its evidence or is attempting to get ahead of a lawsuit by framing the narrative early.
Some industry observers compared this to the Disco Elysium controversy, where the original creators were forced out of their own studio by majority investors, sparking similar fan outrage and confusion. Others drew parallels to the Mick Gordon vs. Bethesda saga over the DOOM Eternal soundtrack, where the truth only emerged after both sides had made public accusations, and receipts were eventually brought forward.
As it stands now, no party has released documentation. There are yet no emails, no contract clauses, no internal reports. Without that, it remains speculative as to whether Subnautica 2 was indeed “ready enough” for Early Access by early 2024 or whether the game’s quality genuinely warranted a delay.
What’s Next?
If a lawsuit proceeds, much of this will eventually be clarified through discovery: via emails, meeting notes, internal reviews, and more. However, lawsuits of this nature are often settled out of court and accompanied by gag orders, which could mean the full story never becomes public.
In the meantime, the Subnautica franchise remains in limbo. The development team still at Unknown Worlds is reportedly continuing work on Subnautica 2, and KRAFTON has reiterated its support for them. The company has also promised “fair and equitable compensation” for remaining developers, though it’s unclear whether that means a new bonus structure or simply continued employment.
What’s undeniable is that both KRAFTON and Unknown Worlds’ original leadership now face reputational risks. For KRAFTON, the challenge is to prove that its actions were motivated by quality control, not financial evasion. For Charlie Cleveland and his co-founders, the burden will be to show they fulfilled their obligations, and that their film project didn’t interfere with the job they were being paid to do.
FAQ: Subnautica 2 Legal Drama and KRAFTON Dispute
What exactly is the dispute between KRAFTON and the original Subnautica 2 developers?
The conflict centers on a $250 million earn-out bonus tied to Unknown Worlds hitting revenue milestones by the end of 2025. KRAFTON alleges the studio’s former leadership, including Charlie Cleveland and Max McGuire, abandoned their roles on Subnautica 2, leading to project delays. The founders, meanwhile, are reportedly suing KRAFTON, possibly claiming the game was ready for Early Access and that the publisher delayed it to avoid the payout. The exact legal claims have not been made public.
Was Subnautica 2 delayed on purpose to avoid paying the $250 million bonus?
That is the core speculation among fans, but there’s no concrete evidence. KRAFTON claims the Early Access build lacked sufficient content and that leadership absence led to delays. The former developers reportedly believe the game was ready. Without access to contracts or internal communications, this remains unverified.
Did all of the Subnautica 2 team stand to benefit from the earn-out?
It doesn’t seem like it. KRAFTON’s public statement says roughly 90% of the $250 million was allocated to three executives. While Reddit users have claimed that previous profits from Subnautica were shared among the team, there’s no documentation confirming any revenue-sharing agreement for the earn-out itself.
Is the Subnautica 2 lawsuit public?
No. As of now, no official court documents have been published. KRAFTON confirmed that the founders have initiated legal action, but the details, including the exact nature of the claims, have not been disclosed.
Who is still working on Subnautica 2?
The current development team at Unknown Worlds is still actively working on Subnautica 2. KRAFTON has reaffirmed its support for the remaining team and promised them “fair and equitable compensation,” though it’s unclear what form that will take.
What is Charlie Cleveland doing now?
According to multiple Reddit threads and online materials, Cleveland is working on a film project called Nutmeg & Mistletoe. The website for the film includes AI-generated art and a podcast, which has been widely discussed in the context of his departure from the Subnautica 2 project.
When is Subnautica 2 expected to release?
As of KRAFTON’s July 2025 statement, the Early Access release of Subnautica 2 has been pushed to 2026, missing the revenue deadline set for the earn-out bonus. No new specific date has been announced.
What was KRAFTON’s tone in their public statement?
Unusually direct and critical. KRAFTON named former executives, accused them of abandoning the project, and described feeling “betrayed.” This kind of public criticism is rare in corporate disputes and suggests either confidence in their legal position or a strategic attempt to influence public perception ahead of legal proceedings.
