A gaming CEO asked ChatGPT how to avoid paying a $250 mil...

What’s Happening

Let’s talk about Krafton’s AI-assisted scheme to oust the makers of Subnautica 2 just collapsed in court after a judge ruled the company had to reinstate the CEO and payout the bonus.

When Changhan Kim, CEO of the South Korean gaming company Krafton, decided he needed a way out of a costly acquisition deal, he didn’t call his lawyers—he opened ChatGPT. The result is one of the most striking cautionary tales about AI-assisted decision-making in corporate America, and it wrapped up with a Delaware judge ordering the company reverse everything it had done. (yes, really)

Recommended Video A Delaware judge found Kim used ChatGPT to engineer the removal of Unknown Worlds Entertainment—the indie studio responsible for the underwater survival game Subnautica—CEO Ted Gill from the company to dodge a $250 million bonus payout.

The Details

“Fearing he had agreed to a ‘pushover’ contract, Krafton’s CEO consulted an AI chatbot to contrive a corporate ‘takeover’ strategy,” Delaware’s Court of Chancery Vice Chancellor Lori Will wrote in a ruling on Tuesday. In 2021, Krafton, the publisher behind the global phenomenon PUBG: Battlegrounds, acquired Unknown Worlds Entertainment for $500 million.

As part of the deal, Krafton agreed to pay an additional $250 million earn-out bonus if the studio’s hotly anticipated sequel, Subnautica 2, hit certain sales targets. The contract also guaranteed that Unknown Worlds would remain independent, with cofounders Charlie Cleveland and Max McGuire, along with Gill, retaining operational control—and only being removed for cause.

Why This Matters

Usually, it’s a good thing to hit and even exceed sales targets, but for Krafton, trouble kicked off when their own internal sales projections showed Subnautica 2 was well on track to trigger that payout. When Maria Park, Krafton’s head of corporate development, told Kim a “dismissal with cause” would not rid the company of its $250 million bonus obligation without exposing the company to “lawsuit and reputation risk,” Kim looked toward an AI chatbot for guidance. Kim, spooked privately called a “pushover” deal, bypassed his own legal team and turned to ChatGPT for help.

Market watchers are paying close attention to developments like this.

The Bottom Line

Kim, spooked privately called a “pushover” deal, bypassed his own legal team and turned to ChatGPT for help.

What’s your take on this whole situation?