I see some points but i'm getting tired of the bashing Basecamp gets. We can clearly see where it went wrong - i mean, at some size of the business it doesnt look good if employees make fun of customer names internally. But come on, i dont think any of the customers were hurt or affected at all, none of them even complained about any such thing happening. So this was some internal whistleblower who raised the alarm and then some internal shitstorm started. And suddenly a stupid joke becomes racism, sexism or other form of criminal offense and nobody has any control over what's going on.

Did the company become toxic? Of course, something broke internally. But was it a toxic place before raising the issue? Not necessarily. It was just some inappropriate fun that should have been quieted and stopped without making a big fuss and throwing accusations around. There are some people who take advantage of such occassions if they can accuse coworkers of 'big offenses' like racism or sexism and hope to cause as much damage as possible (with a good chance of succeeding in such case).

Of course I dont know the real situation at Basecamp, but have seen how easy it's to destroy relationships inside the company and company's reputation by throwing around accusations of pathological behaviors.