>Also, money is fungible. What if AirBnb has earnings from elsewhere that could pay the dividend, meeting the early shareholders' desire for a interim diversifying return? But, that would then leave less capital for expansion. However, new investors are happy investing money that replaces (and then some) the cost of the dividend to support expansion costs.

>There'd then be no essential violation of the way you think things are 'supposed to be': just think of earnings paying dividends, and then new investment adding all required expansion capital.

Even if they had other sources able to completely cover the "dividends", there seems to be the causality link between the investment and the "dividends". In Tom DeLay's case the causality between "donors to RNC" and "RNC to candidates" allowed the jury to recognize shortcut-ed "donors to candidates". It seems to me that it was an obvious bonus (i.e. ordinary income) to founders which for the purposes of lower tax rates (i.e. basically for the reason of greed) was shaped as dividend, and as result they seems to step into the Madoff territory.

>Everybody who's a party to the transaction is happy, in a tax/legally-efficient manner, and no one's rights are trampled.

people were fighting to get a piece of Madoff action.