In a striking case highlighting the risks of AI-assisted decision-making, a Delaware court has found that Changhan Kim, CEO of KRAFTON, the company behind PUBG: Battlegrounds, used ChatGPT to plan the removal of leadership at Unknown Worlds Entertainment, according to a report by Fortune.
A judge in Delaware’s Court of Chancery ruled that Kim relied on the AI chatbot to engineer a strategy aimed at avoiding a $250 million earn-out payment tied to the studio’s upcoming game.
“Fearing he had agreed to a ‘pushover’ contract, KRAFTON’s CEO consulted an artificial intelligence chatbot to contrive a corporate ‘takeover’ strategy,” she wrote.
The court found that executives are expected to exercise independent judgment and not outsource key decisions to AI systems.
The deal also ensured that the studio would remain independent, with co-founders Charlie Cleveland and Max McGuire, along with CEO Ted Gill, retaining operational control and only removable for cause.
After initially being told the earn-out would be difficult to cancel, Kim pushed the chatbot further. It then generated a multi-step plan referred to as “Project X.”
The strategy included forming an internal task force, renegotiating terms or forcing a takeover, securing control over distribution platforms and game code, and reframing the dispute publicly around “quality” and “fan trust.” The chatbot also helped draft a public message aimed at players.
The plan ultimately backfired, raising concerns within the gaming community and intensifying scrutiny around the company’s actions.
As a result, Gill has been ordered reinstated as CEO, with the authority to restore the co-founders. The earn-out period has also been extended to account for the disruption caused by the leadership changes.
“While we respectfully disagree with today’s ruling, we are evaluating our options as we determine our path forward,” the company said, adding that litigation over damages and the earn-out remains unresolved.
Unknown Worlds Entertainment had not responded to requests for comment at the time of publication.
A judge in Delaware’s Court of Chancery ruled that Kim relied on the AI chatbot to engineer a strategy aimed at avoiding a $250 million earn-out payment tied to the studio’s upcoming game.
Judge criticises use of AI in corporate decision-making
Vice Chancellor Lori Will said in her ruling that Kim turned to an artificial intelligence chatbot after realising he may have agreed to what he described as a “pushover” contract.“Fearing he had agreed to a ‘pushover’ contract, KRAFTON’s CEO consulted an artificial intelligence chatbot to contrive a corporate ‘takeover’ strategy,” she wrote.
The court found that executives are expected to exercise independent judgment and not outsource key decisions to AI systems.
Background of $500 million deal and earn-out clause
In 2021, KRAFTON, the publisher behind PUBG: Battlegrounds, acquired Unknown Worlds Entertainment for $500 million. The agreement included an additional $250 million earn-out if the studio’s sequel, Subnautica 2, met specific sales targets.The deal also ensured that the studio would remain independent, with co-founders Charlie Cleveland and Max McGuire, along with CEO Ted Gill, retaining operational control and only removable for cause.
AI ‘Project X’ strategy to avoid payout
According to the report, internal projections showed Subnautica 2 was likely to meet the targets, triggering the payout. When company executives warned that removing leadership would pose legal and reputational risks, Kim turned to ChatGPT for alternatives.After initially being told the earn-out would be difficult to cancel, Kim pushed the chatbot further. It then generated a multi-step plan referred to as “Project X.”
The strategy included forming an internal task force, renegotiating terms or forcing a takeover, securing control over distribution platforms and game code, and reframing the dispute publicly around “quality” and “fan trust.” The chatbot also helped draft a public message aimed at players.
The plan ultimately backfired, raising concerns within the gaming community and intensifying scrutiny around the company’s actions.
Court orders reinstatement of CEO and leadership
Despite warnings from internal teams, KRAFTON proceeded to remove Cleveland, McGuire and Gill. The court ruled that these actions were taken without legitimate cause.As a result, Gill has been ordered reinstated as CEO, with the authority to restore the co-founders. The earn-out period has also been extended to account for the disruption caused by the leadership changes.
KRAFTON responds says evaluating next steps
In a statement to Fortune, KRAFTON said it “puts players at the heart of every decision” and highlighted ongoing efforts to prepare the game for early access release.“While we respectfully disagree with today’s ruling, we are evaluating our options as we determine our path forward,” the company said, adding that litigation over damages and the earn-out remains unresolved.
Unknown Worlds Entertainment had not responded to requests for comment at the time of publication.
