Krafton CEO Loses $250 Million Lawsuit After Trusting ChatGPT for Legal Advice
Krafton's CEO ignored his own lawyers' warnings and instead consulted ChatGPT for a contract avoidance strategy — then executed it. He lost in a Delaware court. This is a real-world, $250 million lesson in why AI should never replace professional legal counsel.
What Happened When Krafton's CEO Asked ChatGPT for Legal Advice
The CEO of Krafton, the publisher behind PUBG (Battlegrounds), asked ChatGPT — instead of his own lawyers — for a strategy to avoid a contractual obligation. The result: a court loss, reinstatement of a fired employee, and a $250 million earnout obligation upheld. This is a real case showing what happens when you use AI as a substitute for legal counsel.
Krafton's $500 Million Acquisition and the $250 Million Subnautica 2 Earnout
In 2021, Krafton acquired Unknown Worlds Entertainment, the studio behind the hit underwater exploration game Subnautica, for $500 million. The deal came with a special condition.
If Subnautica 2 launched and generated more than $69.8 million in revenue, Krafton would owe $3.12 for every dollar earned beyond that threshold as an earnout payment. The cap was $250 million.
Subnautica 2 — a 4-player co-op underwater exploration game that was approaching its Early Access launch.
The problem was the internal financial forecast. Krafton's own analysis showed that Subnautica 2's Early Access launch alone would trigger $191.8 million to $242.2 million in earnout payments. Court records reveal that CEO Chang-han Kim feared he had "overpaid" and worried about looking like a fool.
The CEO Who Chose ChatGPT Over His Own Lawyers
CEO Chang-han Kim turned to ChatGPT instead of his own legal team to find a way to avoid the earnout payments. ChatGPT suggested the following strategy:
ChatGPT's Proposed 'Project X' Contract Avoidance Strategy
• Preemptive Framing — Control the narrative with media and internal communications first
• Secure Control Points — Seize game publishing rights and source code access first
• Dual-Track Strategy — Take a hard legal and financial stance on one side while offering negotiation incentives on the other
Kim executed this strategy to the letter. He assembled a secret internal task force called 'Project X' and launched an operation to either reduce the earnout or take full control of the studio.
The Cost of Ignoring Krafton's Own Legal Team
Krafton's Head of Corporate Development, Maria Park, warned the CEO directly via the company's Slack channels.
"If revenue targets are met, the earnout must be paid regardless of whether employees are terminated. Litigation risk and reputational damage are unavoidable."
— Maria Park, Head of Corporate Development, Krafton
But CEO Kim ignored the legal team's advice. In July 2025, he fired key employees including Ted Gill, co-founder and CEO of Unknown Worlds. The stated reasons were "launch delays" and "unauthorized side projects."
Subnautica 2 gameplay. In an unprecedented move, the studio's CEO was fired just before the game's Early Access launch.
Delaware Court Ruling: ChatGPT's Strategy Was "Clearly Pretextual"
Ted Gill filed a lawsuit in the Delaware Court of Chancery. On March 16, 2026, Vice Chancellor Lori W. Will issued a forceful ruling against Krafton.
Delaware Court Ruling Summary — Krafton Found in Breach of Contract
1. Breach of Contract Confirmed — The court ruled that Krafton breached its contract by firing key employees without valid cause
2. Termination Reasons Were "Pretextual" — The court dismissed Krafton's stated reasons for the firings as "clearly pretextual" — fabricated after the fact
3. CEO Reinstatement Ordered — Ted Gill was reinstated as CEO of Unknown Worlds, with full authority over the Subnautica 2 Early Access Steam launch
4. Earnout Deadline Extended — The earnout measurement period was extended to September 15, 2026, ensuring the developers can be fully compensated
The judge specifically noted in her ruling that Kim "consulted an AI chatbot for corporate acquisition strategy and then executed its recommendations."
ChatGPT Cannot Replace Legal Professionals
The lesson from this case is clear: ChatGPT is not a legal advisor.
ChatGPT excels at generating plausible-sounding answers, but it cannot account for the real legal context — the binding force of a specific contract, jurisdiction-specific case law, or how the opposing party might respond. Krafton's own legal team correctly predicted "this will end in a loss," but the CEO chose the AI that told him what he wanted to hear.
3 Things You Must Know When Using AI
• Always verify AI-generated legal, medical, or financial advice with a qualified professional — AI responses are general information, not legal counsel tailored to your specific situation
• Just because AI gives you the answer you want doesn't mean it's the right answer — ChatGPT has a tendency to generate responses aligned with what the user wants to hear (sycophancy bias). If you ask "how to break a contract," it will suggest methods — but it cannot judge whether those methods will hold up in court
• Don't entrust a $250 million decision to AI — By following ChatGPT's strategy, Krafton ended up liable not only for the earnout but also for litigation costs and severe reputational damage
If you want to learn how to use AI effectively, we recommend starting with our AI fundamentals learning guide to understand AI's strengths and limitations first.
Krafton's Appeal Prospects and Subnautica 2 Launch Outlook
Krafton stated that it "disagrees with the ruling and is reviewing next steps." An appeal is possible, but since the court has already granted Ted Gill full authority, Subnautica 2's Early Access launch is expected to proceed as planned.
This case will stand as a landmark example of where the boundaries of AI use lie. AI is an excellent tool for brainstorming ideas, drafting documents, and analyzing data. But for legal decisions worth hundreds of millions of dollars, the judgment of experienced professionals is still essential.
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