The Delaware Court of Chancery’s March 2026 decision in Fortis Advisors, LLC v. Krafton, Inc. is an attention-grabbing example of the types of legal issues that can arise when a founder and acquirer’s relationship goes south. The decision also features a CEO using ChatGPT to plot a strategy for avoiding a massive earnout, ignoring the warnings of his colleagues, and watching his chatbot exchanges become trial exhibits.
The court’s decision presents an important learning opportunity for founders, acquirers, and the lawyers who advise them—about how to strategically draft contractual provisions that govern their continuing relationship, and the pitfalls of consulting a chatbot about legal strategy.
The case involved Unknown Worlds Entertainment, the company that developed the hit underwater survival game Subnautica. In 2021, South Korean video game company Krafton acquired Unknown Worlds for $500 million up front. The deal also included a leveraged earnout: If revenue cleared a $69.8 million threshold by December 2025, Krafton would owe $3.12 for every additional dollar, capped at $250 million.
Unknown Worlds’ founders, Charlie Cleveland and Max McGuire, along with CEO Ted Gill, didn’t just negotiate for money. They also bargained for “operational control” of the studio “in all material respects.” And Krafton agreed that it would only have the right to terminate them for limited and specific contractual grounds—most notably, an “intentional act of fraud or dishonesty.” It did not bargain for an employment lock-up that would have required Cleveland and McGuire, who were the masterminds behind Subnautica, to remain in their original roles, work a minimum number of hours, or stay engaged in the development of the expected blockbuster sequel, Subnautica 2. Citing “burnout” and feelings of becoming “obsolete,” Cleveland and McGuire eventually reduced their involvement in the business.
In spring 2025, Unknown Worlds was ready to give its eager customers early access to Subnautica 2. Krafton ran the numbers and realized the launch would almost certainly trigger a huge earnout. Krafton’s CEO, Changhan (CH) Kim, who had personally led the acquisition, started to look for a way to avoid the payment. He told colleagues the contract was a “bad deal” and worried that paying the earnout would make him look like a “pushover.” In one Slack message, he complained that “[h]uman greed really has no limit.”
In response, Maria Park, Krafton’s head of corporate development, warned Kim that firing the founders for cause wouldn’t eliminate the earnout and would expose the company to “lawsuit and reputation risk.” Instead of going to a lawyer to check this advice and develop legal strategies, Kim went to ChatGPT.
ChatGPT first responded that the earnout would be “difficult to cancel.” After Kim pressed further, however, the chatbot produced a multi-step strategy for avoiding the earnout, including a “pressure and leverage package” and an “implementation roadmap” with a “two handed strategy” of hardball and softball tactics. Kim forwarded ChatGPT’s output to his head of strategy, dubbed ChatGPT’s strategy “Project X,” and implemented the plan. Krafton blocked Unknown Worlds from releasing Subnautica 2 on the Steam publishing platform and posted unilateral messages on the developer’s website emphasizing the need to prioritize quality over speed in releasing Subnautica 2, and falsely claiming that Cleveland and McGuire were considering coming back to “helm the journey.” Ultimately, on July 1, 2025, it fired Cleveland, McGuire, and Gill, citing their “premature release” of Subnautica 2 as cause for the firings and Krafton’s takeover of operational control.
The case rapidly proceeded to trial. By the time of the trial, Krafton had abandoned its “premature release” theory. Instead, it argued that it was justified in firing the founders because they had secretly downgraded their own roles and downloaded mass quantities of company data in the days before the firing.
In her post-trial decision, Vice Chancellor Lori Will rejected Krafton’s arguments. She ruled that the founders had disclosed that they were reducing their everyday involvement in the business, so there was “no deception, no coverup, and no intent to mislead.” As for the data downloads, the judge found that those were a defensive maneuver in response to Krafton’s aggressive actions; the data wasn’t misused, and it was returned to Krafton promptly. None of these actions, said Vice Chancellor Will, constituted an “intentional act of dishonesty” under the contract. In addition, CEO Kim’s ChatGPT plan showed that Krafton’s actions were a pretext designed to avoid the earnout by any means necessary. Vice Chancellor Will ordered that Gill had to be reinstated as CEO, with operational control restored to the founders, who would decide on the Subnautica 2 launch timing. In addition, she extended the earnout window by 258 days, the length of Gill’s wrongful ouster.
Vice Chancellor Will’s decision is an important cautionary tale for founders, acquirers, and the lawyers who advise them, for two main reasons.
First, the decision shows that founders and acquirers must clearly define their relationship up front with their collective goals in mind and anticipate the potential outcomes if the relationship sours. Unknown Worlds and Krafton agreed to an earnout that appeared to be designed to align their goals—continued success of the acquired business, with the visionaries who designed Subnautica at the helm. But the earnout assumed that the founders would continue to lead the project, which ultimately created friction when two of them stepped back from day-to-day involvement with the business and Krafton started to regret its generosity. Krafton was incentivized to keep the spoils for itself, while the founders had to rely on Krafton’s good-faith performance to protect their end of the bargain.
Ultimately, the relationship imploded, but because the founders had negotiated strong protections in the original deal, Krafton did not have a viable path for stopping the release of the new game, discharging the founders from their positions for cause, and avoiding their payout. The court criticized the founders’ decision to download company data—with Gill claiming to an IT administrator that he was just “backing a few things up”—as “wrong,” but ultimately decided that these actions didn’t meet the “intentional dishonesty” standard. With different contractual language, however, this defensive self-help might have cost the founders their earnout.
Second, executives should go to lawyers for legal advice, not ChatGPT. An executive’s conversation with a lawyer is privileged. As multiple courts have now found, the same conversation with a chatbot—even if it pertains to legal matters—may be subject to discovery. In Krafton’s case, Kim’s prompts and ChatGPT’s responses were produced in the litigation and were quoted at length in the court’s opinion. These exchanges showed that Krafton first developed a plan to freeze out the founders and stop their earnout, and then came up with the business justifications for its strategy. Vice Chancellor Will leaned on the exchanges heavily to find that Krafton’s termination grounds were pretextual.
Kim chose to follow a chatbot down the primrose path rather than listening to his human advisers, who weren’t telling him what he wanted to hear. Park, who was close to the deal and had a seat on the Unknown Worlds board, told him that a for-cause firing wouldn’t kill the earnout and would create litigation risk. And by the court’s account, Krafton’s legal team was looped in late to document a strategy that had already been chosen. By substituting a chatbot for counsel, a CEO doesn’t just lose privilege; human perspective and the judgment to reject a bad strategy are lost as well.
So, for executives who are considering asking ChatGPT for their next legal move, the answer is simple: don’t. If a conflict is significant enough that it requires a strategy to resolve it, consult a lawyer, rather than resorting to an algorithm. You should assume that all of your communications with chatbots will be read aloud in court. There can be legitimate reasons for avoiding an earnout or terminating someone for cause. But those reasons should be sincere, strongly supported, and not undercut by a chain of unhelpful chatbot messages telling a different story.