I still can't get over the first thing he wants to do with the initial funding is hand it over to his team for all their 'Pro Bono' work.
Not to mention it could be an issue with unemployment. If the ones who were laid of really were, and not fired or quit in a huff or something, and they're drawing unemployment, that means they need to still be looking for work, first off, and my guess is most of them are doing exactly that, and seriously, and not putting all their eggs in this basket, which in part may be why their working full time on this project actually doesn't seem that way.
Secondly, they can't simply be back-paid for work they'd been doing while working for free on unemployment without paying back that unemployment. In a few states, I've even seen questions about whether you were doing work you expected to be paid for in the future, or got paid any bonus or back pay for work previously done.
So, yeah, they just find a way to pay them a 'bonus' off the books, but in a state like California it wouldn't surprise me if they investigated or were tipped off and put 2 and 2 together that a business owner has had people working basically for free, off the clock, while they drew unemployment, made public statements that they were doing work for the company, then public statements it was intended they be paid for that work, and then suddenly they get a 'bonus' off the books or for something that they claim isn't that back pay wink wink.
I've seen far smaller profile companies doing far less get pegged for stuff like that, and I don't exactly trust them to defraud California unemployment offices nearly as easy as the average fool willingly parting with their money. But, I'm sure they've got a good business plan in place!