I recall having to sit through many trainings on how to value employee equity. My experience is that most startup employers try to BS what it means to convince people to value their equity at a significantly higher price than they otherwise should.

If the employer is explicitly making the employee options worthless, then they should be obligated to disclose this. Otherwise it’s trivial to engineer a corporate entity which pays the employees while “licensing” the technology from an IP holding firm. Later they can simply sell the IP holding firm without owing employees a dollar.