How is collecting a payback on a legitimate investment unethical?

His fathers business invested some money in his corporation. Now, from the story it appears that they didn't expect much of a return on this investment, but I don't think they acted predatory in any way.

I don't see why there should be any reason for a "payback" here, that is not how investing works, and quite frankly sounds very selfish and biased to me. If his business had completely failed and he ended up broke, would he be looking for a legal loophole to repay that $20,000 investment back to the company? I would tend to doubt it.

His scenario is almost exactly the model/concept of VC investing... Money is invested in seed companies knowing that it is highly probable it will be lost, but the slim chance of a large payoff makes the risk worthwhile.

It sounds like you didn't really read the post. His father "invested" (although it was more realistically a gift/loan) in his band. Years later when he started an entirely new and different business he reused his old bank account/business entity out of laziness/ignorance. His father had no ethical claim to that new business/money.

You are right. But it was his dad advising him. If he saw that his kid's business is growing big - he would have advised him to buy back shares much earlier and probably give him a personal debt to buy back shares. Why should an accountant enlighten him on what he owns.

The only reason I can think of without blaming his investor dad is his dad wants to shelter his kid all the time and doesn't think of him fit to run independently or doesn't want him to take that risk at all.

My interpretation of it was the the $20,000 investment was small change to the company, and was most likely never given a legitimate second thought by his father.

Right I understood your point and could be very valid. But for 90% owning, I have my doubts. Anyway what I felt was later when his dad would have seen his son's business blooming he should have done something about it. Asked him to buy back early or at least let him know that for all his work he owns just 10% and it just the first investment.