Investors will sometimes agree to write down their equity to ~zero, if it's obvious that bankruptcy would yield the same result with more legal fees. In this c

Investors will sometimes agree to write down their equity to ~zero, if it's obvious that bankruptcy would yield the same result with more legal fees. In this case, the previous investor was also the lender. So nothing above explains how they could end up with "nothing", unless that's counting only the equity and ignoring the debt.