So my interpretation is: this is good for shareholders.

Can you give me examples of people in jail for this 'crime'? At worst people saw social network, and it seemed a ok.

My understanding is that options for common shares, such as terms at YC, have not even anti dilution protection. So the # you have is a snap shot, and nothing to do what that % would be when you fully vest.

people holding options are not shareholders until they exercise those options.

Excellent point, but equally important is the fact that even if you purchase your < 1% of shared, if you are a regular middle class person, you will probably have no real legal recourse to sue if you get screwed. The investors who are most likely behind it will cover their asses and so far outgun you legally that it is probably hopeless to try to fight even if you have the means.

This is where the GGGP (davidwihl) is both right and wrong—knowledge of the cap table at signing won't guarantee anything, but that combined with a good judgement of character is the best you can do. In the end you can get screwed either way, but if there is any caginess up front then run don't walk away.