Krafton CEO’s AI-Driven Plot to Evade $250M Payout Blocked by Delaware Court

The intersection of generative AI and executive decision-making has reached a litigious milestone in the gaming industry, as the Delaware Court of Chancery ruled against Krafton CEO Changhan Kim for attempting to use ChatGPT to circumvent a $250 million earnout agreement. The case, which centers on the acquisition of Unknown Worlds Entertainment (UWE), the studio behind the hit Subnautica franchise, serves as a stark warning to HR and corporate leadership about the limits of AI-assisted strategy in high-stakes talent management and M&A.

In 2021, Krafton acquired UWE for $500 million, a deal that included a performance-based earnout of up to $250 million if the sequel, Subnautica 2, met specific sales targets. Crucially, the agreement guaranteed UWE’s leadership—including its co-founders—operational independence and job security, unless there was a valid reason for removal. However, as internal projections for the sequel began to indicate that the $250 million payout was highly likely, Kim reportedly began to view the original contract as a 'pushover' deal that favored the acquired studio too heavily.

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In 2021, Krafton acquired UWE for $500 million, a deal that included a performance-based earnout of up to $250 million if the sequel, Subnautica 2, met specific sales targets.

When Krafton’s legal counsel warned that removing UWE’s leadership to avoid the payout would be legally indefensible, Kim turned to ChatGPT. According to court findings, the CEO used the AI chatbot to 'contrive' a corporate takeover strategy. While the AI initially noted the difficulty of evading the bonus, it eventually helped formulate 'Project X,' a multi-pronged internal plan designed to force a renegotiation or seize control of the studio. This strategy involved gaining control over publishing rights on platforms like Steam, taking charge of the game’s source code, and framing the leadership removal as a necessary move for 'game quality and player trust.'

The execution of Project X led to the abrupt removal of UWE’s key leaders, including its co-founders and CEO. This move sent shockwaves through the gaming community and raised immediate concerns about the stability of the studio and the future of the Subnautica franchise. The displaced leadership sought relief in the Delaware Court of Chancery, where Vice Chancellor Lori Will issued a scathing ruling. Will characterized the 'Project X' task force’s mandate as a 'takeover' intended to buy time and avoid a legitimate contractual obligation. The court ordered Krafton to restore the UWE leadership, effectively nullifying the AI-generated strategy.

This case highlights a critical evolution in the 'AI in the workplace' narrative. While much of the HR focus has been on AI for recruitment or productivity, this incident demonstrates the risks of AI being used at the highest levels of executive strategy to undermine talent contracts. For HR leaders, the Krafton ruling emphasizes the sanctity of earnout structures and the legal protections afforded to acquired talent. Earnouts are a standard tool in M&A to align interests and retain key personnel; attempting to 'engineer' a cause for termination to avoid these payments is a high-risk maneuver that courts are increasingly equipped to identify, even when masked by AI-generated justifications.