From 30 minutes reading about this and no prior knowledge about the project or the people involved, this seems to be the probably wrong timeline:
1. Developer starts a project, hacks on it for a while.
2. Developer decides he'd like to get paid for hacking on project.
3. Enter guy. Developer and guy incorporate, with guy as CEO and director, developer as CTO and person who does all the coding. Ownership is 50-50, company assets and personal assets are a mess (domain name & DNS are on the CEO's personal card, copyright for the code CTO writes is not assigned to the company, CTO controls private keys, and some are his personal private keys from before the incorporation).
4. CEO & CTO have a falling out wrt company direction.
5. CTO takes this personally, as a betrayal, seeing the falling out as the destruction of the project he has built basically single-handedly at great personal sacrifice.
6. CTO destroys private keys, plans to sue over copyright. Project is now imploded.