Something I did not mention is that the CEO was cultivating an overly confidential culture. Over the past couple months I did not know who our clients were, how much they were paying, status updates from our software development. It felt like I was mindlessly rowing a canoe with blinders on and earlplugs in. While this definitely is one management strategy, I don't agree with it. As a result I think I got a little unplugged and they didn't like it.
I don't want to reveal what we sold yet to preserve confidentiality for them.
I'd take the 3.5 months worth of equity just in case and start looking for another job.
(Oh, and next time do your expenses and take a sustainable salary! Early-stage employee doesn't equal martyr.)
Anyway, the right answer here is to work for someone who doesn't pull crap like this. And if the OP was competent at his job, I would hope the other employees have seen what happened and are properly aware of their employer's shady ethics. In any regard, this is just bad business and likely killed morale to some degree.
OP, listen to kls...now that you've seen how this can go you will really be a lot stronger when you negotiate your next job. There's different kinds of options available too, but unless you ask about which kind you get, you'll just be given the default (i.e. cheaper for the company).
If you feel you were wronged, sue them for what you feel is right and move on as quickly as possible. This entire situation sounds insane. Either you or they are completely off the rocker.