Former Krafton Investment Head Speaks Out on Subnautica 2 Dispute: “Not a Case of a Big Corp Screwing a Small Indie”

Subnautica 2 (Image Credit: Unknown Worlds/Krafton)

The Subnautica 2 dispute continues to evolve, and now a key figure involved in the original Krafton–Unknown Worlds deal has stepped into the spotlight. Damian Lee, former head of Krafton's Investment Department and the lead on the 2021 acquisition of Unknown Worlds, has issued a public statement via LinkedIn, offering a new perspective on the legal and financial drama.

Lee, who left Krafton in 2023 and now leads Blue Ocean Games — an independent fund that supports indie developers — confirmed he may be called to testify in the ongoing legal battle between Krafton and the ousted leadership of Unknown Worlds. The lawsuit was filed earlier this week by Subnautica’s co-founders Charlie Cleveland and Max McGuire, along with former CEO Ted Gill, over an unpaid $250 million earn-out bonus. Krafton has maintained that the delay of Subnautica 2 to 2026 was a development decision, not one motivated by financial considerations.

While Lee made clear he couldn’t share all the details due to legal sensitivities, he challenged the prevailing narrative that Krafton acted maliciously. “This is not a case of a big corp screwing over a small helpless indie team,” he wrote. “At its core, this dispute is between a public company and three wealthy founders — who already received over $450 million among them — over an additional $250 million earn-out.”

According to Lee, the majority of that bonus — about 90% — was allocated to the three founders, not the broader development team. However, he added that he believes Krafton likely addressed any changes to employee bonus structures following the shift in release timing. “I’m not sure why Krafton hasn’t communicated this yet, but I would bet that they have fixed any negative impact to devs' bonus formula stemming from changing the launch schedule.” He added, “many of the other narratives out there appear to be designed to incite public anger and bring the rest of the dev team into a mud-fight but are far from truth.”

The leaked milestone review document shared yesterday showed that many planned features were either reduced or removed from the game’s current Early Access build, which Krafton argued needed more time to meet quality standards. The leadership trio, on the other hand, maintains that the game was ready for release in 2025 and that Krafton intentionally pushed the date to avoid triggering the bonus payout — a claim Krafton has denied.

Lee also reflected on the original deal’s expectations. He noted that the $500 million initial purchase price, along with the conditional $250 million earn-out, was based on the founders’ commitment to stay on and lead future development — including multiple new games and expansion of the Subnautica IP. “If it is true that the founders abandoned Subnautica 2 for personal film projects and declined to resume their duties when asked (as Krafton alleges), then to me it is the founders who are in the wrong here,” he said.

Lee expressed concern that public backlash against Krafton — particularly calls for a boycott — could harm indie developers more broadly by discouraging investors from supporting them. “In this environment where fewer and fewer investors are funding indie games, intense backlash against a company that has provided life-changing money to an entire studio... before getting all the facts, is counterproductive.”

While his statement won’t end the controversy surrounding Subnautica 2, it does add a new layer to the increasingly complicated and high-stakes dispute. As the lawsuit moves forward and more insiders speak up, the full story behind one of indie gaming’s most dramatic shakeups may finally come to light.

Damian Lee's Full statement below:

Hi everyone,

I understand that the recent public dispute between KRAFTON Inc. and the founders of Unknown Worlds Entertainment is concerning to some in the Blue Ocean Games community because although BOG is an independent entity that funds and supports indie devs, Krafton is a major investor in the fund. First, I want to clarify that indie devs receiving funding from BOG have no obligations to Krafton. Also, any capital we commit to founders is contractually secure.

Next, I would like to encourage people to reserve final judgment until more information about the dispute comes to light. There appears to be pending litigation during which I may be asked to testify (I headed Krafton’s Investment Dept in 2021 and led the deal on the Unknown Worlds acquisition before leaving in 2023 to start BOG) so unfortunately there are many details I cannot give out here. However, I can confidently say that this is not a case of a big corp screwing over a small helpless indie team. At its core, this dispute is between a public company and 3 wealthy founders (who already received over $450m among the 3 of them) over an additional $250m potential earn-out (90% of which was allocated to the 3 founders). 

A lot of the online hate seems to come from the belief that postponing the game leaves the existing devs in a bad spot. I’m not sure why Krafton hasn’t communicated this yet (maybe there is something preventing them from publicly commenting on people’s bonus schemes), but I would bet that they have fixed any negative impact to devs bonus formula stemming from changing the launch schedule. Many of the other narratives out there appear to be designed to incite public anger and bring the rest of the dev team into a mud-fight but are far from truth. Calling Krafton greedy also doesn’t hold water if you look at how much they continue to fund indie founders and devs vs how little they’ve gotten in return, year upon year, yet they still continue to be one of the most active funders in the indie space. I believe this partially stems from the fact that the CEO of Krafton (CH Kim) was himself a struggling indie dev for a long time before PUBG became a hit. In my time at Krafton and in interactions with upper management, I have not seen a case where major decisions around game dev were made purely based on financial considerations. I think this sets Krafton apart from other large publishers globally and I have no reason to believe this mentality has changed since I left. 

I left Krafton in 2023 so I don’t know all the details about how the relationship between the founders and Krafton broke down and got to this point. I am also not a lawyer so I don’t know how the contract will be interpreted by a judge.

What I do know is that during the negotiation, the founders told Krafton they wanted to devote themselves to making games long term and that being under a parent company would allow them to focus on making more games, better games and faster. 

The $500m already paid and the (up to) $250m potential additional payout was based on a mutual understanding that the founders would stay on long-term, putting in their best efforts to create multiple new games and expand the existing Subnautica IP. If it is true that the founders abandoned Subnautica 2 for personal film projects and declined to resume their duties when asked (as Krafton’s recent statement alleges) then to me it is the founders who are in the wrong here. I sincerely hope that this dispute does not negatively impact potential future funding and acquisition opportunities for indies as this type of situation is one of the biggest nightmare scenarios for investors. In this environment where fewer and fewer investors are funding indie games, intense backlash against a company that has provided life-changing money to an entire studio and continues to do so for many more indie developers, before getting all the facts, is counterproductive. 

These are my thoughts based on what I know currently, but I will reserve final judgement until all the details come to light. I believe information wants to be free and most details will come out eventually.

In the meantime, I hope we can all stay positive and focus on building a healthy eco-system where indie developers, investors and gamers are mutually aligned.