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Their claim that the shares were below market value doesn't stack up. They did this when they founded the company, the company has no value at formation so it's fair priced. Just because they raised money a few months later doesn't mean it was worth anything at formation.

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If you have knowledge that people want to inject money into your startup (and thus raising the value), then stuffing shares into a Roth IRA before a raise (that you know will happen) would surely be skirting the idea of fair-market value.

That very same year, there were two or three funding rounds, according to the article, for $0.5m and $4.5m. Yet at the end of the year, the shares in the Roth were reported to be worth less than the initial $1700.

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