Krafton CEO’s ChatGPT-Driven Plot to Dodge $250M Payout Fails in Court

The intersection of generative AI and corporate governance has reached a litigious milestone as the Delaware Court of Chancery ruled against Krafton, the South Korean gaming giant behind PUBG. The case centers on an unprecedented attempt by Krafton CEO Changhan Kim to use ChatGPT to devise a strategy to circumvent a $250 million earnout payment owed to the founders of Unknown Worlds Entertainment. This ruling not only restores the leadership of the Subnautica developer but also serves as a stark warning to executives attempting to use AI tools to navigate complex legal obligations and M&A contracts.

The conflict traces back to Krafton’s 2021 acquisition of Unknown Worlds for an initial $500 million. As part of the deal, a performance-based earnout of $250 million was established, contingent on the success of the studio’s upcoming sequel, Subnautica 2. As the game neared its release window, internal financial projections suggested that the sales targets would almost certainly be met, triggering the full payout. Fearing he had negotiated a 'pushover' contract, Kim reportedly ignored warnings from his own legal counsel—who cautioned that removing studio leadership would not void the bonus—and instead turned to ChatGPT for a 'takeover' strategy.

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The case centers on an unprecedented attempt by Krafton CEO Changhan Kim to use ChatGPT to devise a strategy to circumvent a $250 million earnout payment owed to the founders of Unknown Worlds Entertainment.

According to court findings, the AI-generated plan, internally dubbed 'Project X,' was a multi-pronged effort to seize control of the studio’s assets and renegotiate the earnout from a position of strength. The strategy included gaining control over publishing rights on platforms like Steam, taking direct charge of the game’s source code, and framing the leadership removal as a necessary step to protect 'game quality and player trust.' When the studio's co-founders and CEO refused to renegotiate the earnout terms, Krafton moved to terminate them, prompting the legal battle in Delaware.

Vice Chancellor Lori Will’s ruling was scathing, noting that the company had acted in bad faith to 'buy time' and avoid its contractual duties. The court found that the 'Project X' task force’s mandate was a direct violation of the acquisition agreement, which guaranteed the studio’s independence and the leadership’s tenure unless a valid cause for removal existed. By attempting to manufacture a crisis of quality to justify the takeover, Krafton breached the fundamental 'spirit of the deal' that governs high-stakes M&A in the technology and gaming sectors.