Current "encryption" related concerns provide save-face cover for ran of money quite nicely.

This company also seems pretty low risk, unlike, say, a consumer privacy messaging or VPN service.

Consumer privacy services have very low revenue per customer, so if you attract a few customers with huge attached legal costs, you probably just shut down. I think if you're not a dick, you shut down and offer to pay your existing customers to use an equivalent (if available) service elsewhere for some transition period, since you can't continue operating your service directly.

True, but there's also arguably more demand for encryption now than ever. An experienced entrepreneur like Ziptr's CEO should have been able to play this to the company's advantage with customers, investors, etc. Unless of course they got shut down.

Nonsense. There are many reasons to shut down a service suddenly and almost none of them are things you'd want to brag about. Nobody wants to admit they failed as an entrepreneur.