South Korean gaming giant Krafton has been dealt a major legal blow following a ruling in the Delaware Court of Chancery. Vice Chancellor J. Travis Laster ordered the PUBG publisher to immediately reinstate Charlie Cleveland, the CEO and co-founder of Unknown Worlds Entertainment. The court found that Krafton’s leadership acted in bad faith when they removed Cleveland from his position at the Subnautica development studio.

The legal discovery revealed a bizarre digital paper trail involving artificial intelligence. The court determined that Krafton CEO CH Kim used ChatGPT to help formulate a plan to oust Cleveland. According to the ruling, the AI was used to draft "pretextual" reasons for the termination, which were designed to appear performance-based but were actually intended to block a massive financial milestone.

At the heart of the dispute is a $250 million earnout payment tied to the performance of the upcoming Subnautica 2. Krafton acquired Unknown Worlds in 2021 for an initial $500 million, with the additional bonus contingent on the studio meeting specific targets. The court ruled that by firing Cleveland, Krafton breached its acquisition contract in an attempt to avoid paying out that quarter-billion-dollar sum.

This ruling ensures that Cleveland returns to his leadership role as the studio continues work on its highly anticipated underwater sequel. While Krafton argued the termination was justified, the court remained unconvinced, noting that the company failed to provide credible evidence of wrongdoing. This case marks one of the first major legal instances where a high-level executive's use of ChatGPT played a central role in a corporate bad-faith ruling.