Part of the gap here between the $20M paper valuation would...

Part of the gap here between the $20M paper valuation would presumably be an employee equity stake that would motivate those 4 to stay on for moderate salaries.

They're also presumably going to provide a huge premium for anyone willing to put up cash. The idea that they're going to give you 5% of this company in exchange for $1M doesn't pass the laugh test.

I wouldn't fixate on the $20M or 25% numbers - this sort of thing is a fiction to make things come out OK. The real issue is balancing the interests of the old holders, the new money and the employees. If RFN or anyone else from the old structure asks for too much equity there's not much to stop the 4 employees + the investors from walking away and reconstituting as "NewCo". They could restart with open source blockchain and it's kind of hard to confiscate the contents of their brains and their rolodexes.