What they seem to be suggesting is that a fair valuation (well reasoned given all information) of the shares would have put the investment at millions of dollars, but due to a peculiarity of historical accounting, they could be put at worth $2K because that was the creation price and the last print.
For instance, it might be that a funding round was about to happen. This is never a sure thing, so you could claim that the shares are not worth the full price (and in any case the only trade was at 2K), while privately thinking "hmm, my shares are now worth x millions".
You then sell the shares to the Roth, thinking yourself that you're putting x millions in the vehicle while reporting 2K.
Doesn't sound illegal to me, but it also doesn't sound like things are supposed to work this way.
For instance, it might be that a funding round was about to happen. This is never a sure thing, so you could claim that the shares are not worth the full price (and in any case the only trade was at 2K), while privately thinking "hmm, my shares are now worth x millions".
You then sell the shares to the Roth, thinking yourself that you're putting x millions in the vehicle while reporting 2K.
Doesn't sound illegal to me, but it also doesn't sound like things are supposed to work this way.