Regarding the fact that the employees had to pay tax on what turned out to be worthless shares:<p>They could have avoided this by waiting to exercise their options on the eve of the liquidity event. In this case there would have been no risk. But they exercised earlier presumably to start the clock on long term capital gains treatment for the stock they received when they exercised.<p>They took risk they didn&#x27;t need to take and they got burned. It&#x27;s worth keeping that in mind as another aspect to the story.