> He purchased shares of his own startup at 0.001 cents, way below market rate. The proper term is "fair market value" and before a company is publicly traded,

> He purchased shares of his own startup at 0.001 cents, way below market rate. The proper term is "fair market value" and before a company is publicly traded, the FMV is set by the Board and whatever investors have evaluated it and determined it to be. In this case, it looks like it was before any investors had put in their money so the Board was simply the founders. At that stage, the Board normally sets the strike price (what you get the shares for) the same as the fair market value (what they're "worth") and you pay taxes on the difference. Fractions of a cent are common at that stage. The risk is that the fair market value will never go higher and is likely to be zero (aka failed).