Krafton CEO’s ChatGPT Gamble Backfires in Subnautica 2 Dispute

A Delaware court has ordered Krafton, the South Korean gaming company behind PUBG: Battlegrounds, to reinstate the ousted CEO of Unknown Worlds Entertainment, Ted Gill, after finding that the company used advice from ChatGPT to engineer his removal. The move was an attempt to avoid paying a $250 million bonus tied to the success of Subnautica 2.

The Acquisition and the Bonus Clause

In 2021, Krafton acquired Unknown Worlds Entertainment for $500 million. The acquisition agreement stipulated that Unknown Worlds would remain independent, with its co-founders, Charlie Cleveland and Max McGuire, and CEO Ted Gill retaining operational control, removable only for cause. Crucially, the contract included a $250 million earn-out bonus payable if Subnautica 2 met certain sales targets. [Fortune]

Buyer’s Remorse and the AI Consultation

As internal projections indicated Subnautica 2 was on track to trigger the $250 million payout, Krafton CEO Changhan Kim expressed concerns about the deal, reportedly feeling “taken advantage of.” [The Guardian] Kim’s legal department warned him that dismissing the leadership “with cause” wouldn’t necessarily avoid the bonus payment and could lead to legal challenges and reputational damage. [GameSpot]

Instead of relying on his legal team, Kim turned to ChatGPT, seeking a strategy to remove Gill and the other leaders. The court found that Kim used the chatbot to “contrive a corporate ‘takeover’ strategy.” [Fortune]

The Court’s Ruling

Delaware’s Court of Chancery Vice Chancellor Lori Will ruled against Krafton, ordering the reinstatement of Gill and the other ousted leaders. The judge found that Kim’s actions were a deliberate attempt to circumvent the terms of the acquisition agreement and avoid the bonus payment. [IBTimes] The court emphasized the importance of upholding contractual obligations and warned against relying on AI-generated legal advice.

Implications and Future Outlook

This case serves as a cautionary tale about the risks of relying on artificial intelligence for critical legal and business decisions. While AI tools can be valuable, they should not replace the expertise and judgment of qualified professionals. The incident highlights the potential legal and ethical pitfalls of using AI in corporate strategy, particularly when it comes to contractual obligations and employment law. [The Guardian]

Subnautica 2 is still slated for an early access release on PC and Xbox Series X/S consoles in May. [The Guardian]