US court rules against South Korean gaming company and its AI-hatched takeover plan 

WILMINGTON, Delaware - A Delaware judge ordered on March 16 that South Korean game developer Krafton Inc reinstate the head of one of its video game studios, ruling that he had been improperly removed as part of a takeover plan hatched by ChatGPT.

Krafton’s chief executive officer Changhan Kim had largely followed the advice of AI tool ChatGPT during a US$250 million (S$321 million) dispute with the leaders of the Subnautica game maker Unknown Worlds Entertainment, which Krafton had acquired, according to the ruling by Vice-Chancellor Lori Will of the Court of Chancery in Delaware.

The ruling comes as businesses and governments are scrambling for new ways to use artificial intelligence.

The technology has been blamed for mass layoffs, fears of autonomous weapons and concerns about civil rights.

Companies caught in takeover-related legal battles often spend millions of dollars on teams of attorneys and advisors from top-flight Wall Street firms.

Krafton said in a statement that it disagreed with the ruling and was evaluating its options and remained focused on delivering the best possible game for fans.

The company said it was working “tirelessly” to strengthen the Subnautica sequel and prepare it for early access release.

Attorneys for the studio leadership did not immediately respond to a request for comment.

The dispute stems from Krafton’s acquisition of Unknown Worlds Entertainment for US$500 million up front in 2021.

Krafton agreed the studio would remain independent and that its leadership – co-founders Charlie Cleveland and Max McGuire and chief executive officer Ted Gill – would retain operational control and could only be fired for cause, according to Prof Will’s ruling.

If the company met certain targets, Krafton would pay what is known as an earnout worth up to US$250 million.

As the studio in 2025 was ramping up to release Subnautica 2, internal projections showed it would trigger the earnout, according to the ruling. Krafton’s chief executive Kim feared he was caught in a “pushover” deal and in June turned to ChatGPT to get out of it.

“Over the next month, Krafton followed most of ChatGPT’s recommendations,” Prof Will wrote in her opinion.

As the chatbot suggested, the company formed an internal task force to negotiate a new deal or execute a takeover of the studio.

It also outlined specific actions, including a communications strategy focused on fan trust, securing publishing rights over Subnautica 2 and preparing “systematic material of legal defense”.

Unable to get the leadership to renegotiate the earnout, Krafton removed them, alleging they deceived the company about the diminishing amount of time they were spending at the studio, a claim that the judge rejected.

Prof Will ordered operational control be returned to MrGill, the chief executive of the studio. She also extended the period in which the earnout criteria could be met. REUTERS