AlwaysBCoding

you are issued equity in the form of stock options. Stock options give you the opportunity to buy stock in the company at a specific "strike price" enshrined as the fair market value of the company when you sign your offer letter.

you aren't actually vesting stock month to month you are vesting your stock options. when you "exercise" your stock options you pay the company the strike price * number of options you want to exercise in order to purchase the actual stock in the company.

If the company has grown in value since you joined then you would have a taxable event upon exercising your stock options because you are buying the stock at the strike price, but the fair market value of the stock is significantly higher, so that is a taxable capital gain that you have to deal with.

Any sane company will give you a 10-year exercise window after leaving the company to actually pull the trigger and "exercise" your stock options so that you don't incur a tax liability but some companies only give you three months. Which means not only do you have to front the cash to "exercise" the options, but you also have to pay the tax liability on the capital gain of stock for that year.

If you're asking how you can possibly be expected to pay the tax on a million dollar+ capital gain, without ever even having access to cash or a guarantee you even will have access to cash in the future, then welcome to the scam that is being an employee at a Silicon Valley startup and the fucked up logic of the US tax code.

This isn't true. Company executives don't owe a fiduciary duty to employees or holders of stock options in a company, they only owe a fiduciary duty to concrete shareholders. There are a lot of founders of less than high moral character who want to keep it this way.

I sent a Section 220 demand letter to the founders of this company to get transparency on the money that was taken during the secondary stock sale and they're currently fighting me on it because I wasn't a shareholder at the time the secondary sale took place, I only held options in the company at the time.

This anecdote is illustrating a real world situation in which it is being used as a way for founders to try to screw their employees, not because their hands are tied by some arcane tax law.

what happens if the founders subsequently run the company into the ground, having personally enriched themselves off their employees work, who they then destroyed the upside for?

should the employees have a legal claim against the money that was taken in the secondary transaction?

It's also wrong because it's not the founders work in isolation that is providing the liquidity opportunity in the first place. The entire purpose of a joint-stock company is to align incentives for all shareholders to benefit from the value creation of the company. Founder secondaries are a work-around that hack money into the pockets of a couple people off the back of other's labor instead of collectively enriching the group performing the labor.

you don't need the same voting rights, for example

I'm not sure if you even need the same class of stock as it is needing some assurance of the same liquidity rights as founders. If the company charter ensured that any secondary liquidity event would have equal participation between shareholders (including employee stock options) it would be a lot healthier and prevent this class of fraud.

It's such a garbage situation right now for employees, because even if you find product-market fit, you do the work and your company is successful you can still get dumped on by your founders taking secondaries and subsequently checking out of the company.

The company is Phantom, and the VCs are Paradigm.

The situation I recently went through reads like a horror story:

> was the founding engineer at a startup, essentially do co-founder work for 18 months getting the company off the ground.

> company is a breakout success, raises a large growth round.

> founders each take a couple of million dollars off the table in secondaries, no option for employee liquidity.

> founders start thinking about early employees as "problems" because they have too much equity and could easily hire multiple FAANG engineers for the equity comp they're paying the early team. push all early employees out of the company.

> horrible ego-based decision making such as this kills the company culture and runs the company into the ground. company is a mess, stock is now worth significantly less.

---

> early employees have to pay money to exercise their stock options which are worth millions on paper. early employees have to front money to pay taxes on the capital gains on the stock.

> founders have pocketed millions, off the backs of other people's work, while the employees who built the company all owe huge tax bills and have no path whatsoever to ever seeing liquidity with the floundering company.

> all of this is because the employees did their jobs too well, the company grew too fast, and the founders egos got completely out of control.

To be blunt, situations like this should be illegal. joint-stock companies aren't slush funds for three people to personally enrich themselves off the labor and capital investment of others, they're supposed to be entities where all shareholders participate in the upside of the value creation together. Until there's some sort of legal framework for pursuing class-action lawsuits against founders who defraud their employees like this I don't think this situation will ever get better. There are already laws against self-dealing transactions by company executives, I don't see what is different in cases of extreme founder liquidity off the backs of other people's work.

Another fun fact re: Dustin Moskovitz

Dustin was an early investor in Alameda Research and was also one of the biggest donors to Mind the Gap -- Sam's mom's Super PAC. When SBF was about to go under Dustin was his first call to try to raise money (came out in the FTX trial).

I second everyone saying the paywall is the actual problem. I used to write on Medium a lot because it was a simple way to blog and share essays with a minimalist UI. Now it just feels like a clown product because you have a paywall between users and reading. I would never subject my writing to an ugly paywall and wouldn't want the experience my readers have with my content to be ugly and broken like that.

because the hiring process is on autopilot and the leadership of the company has already exited / checked out so they're not incentivized to care or be in the weeds enough to preemptively put a stop to it.

pretty sure i pumped and dumped some coins on bitrex back in the day.

You can export the chaindata at any time and run geth on another OS, AWS is just a convenience because it's easy to spin up and easy to devops. It costs $300/month to run, I'm using it in production and it works great so far. I'm still glad to take your $1,000 if you'd like a full tutorial.

AWS offers a hosted Ethereum node service now. It's pretty simple to set up. I would be glad to walk you through it for $1,000.