What if they gave you an order to intentionally sabotage the encryption so they could start snooping on your clients? Even worse, they could order you to sabotage encryption without disclosing the fact.
I have a suspicion that this was either happening or he felt was about to happen, since the decision to shut down makes a lot more sense in that context. If it were the case his options were:
A) go along with it and secretly violate his users trust
B) speak out and probably get thrown in jail
C) try to fight a byzantine legal battle in Kafkaesque secret courts, and either compromise users or risk going to jail in the meantime
D) shut the whole thing down.