In any traditional salaried role with a fixed amount of PTO an employee is paid out for any remaining PTO when they leave. "Unlimited" policies are a mess, for among many other reasons, because they allow companies to skimp out on paying time earned.
There is nothing unethical about what the employee did. They earned that time and/or value, and were compensated for it in the only way the company allowed them to be compensated for it. If the company wants a different set of incentives then they should change their vacation policy to a real one.
Your CEO, on the other hand, absolutely acted in an inappropriate way and, assuming they continue not to pay the employee, is acting illegally. Not all startups are like this but it is admittedly amateur hour at most of them.