The news was first reported by Re/code, which has been running a multi-part series on Hsieh's $350 million initiative to redevelop downtown Las Vegas, located north of the Strip.
Hsieh apparently announced his resignation during a surprise all-hands meeting a few weeks ago. Prior to the news of the leadership shakeup, KNPR reported that the project would lay off 30 percent of its staff, or about 30 people. Hsieh's lawyer, Millie Chou, will take over, Hsieh said at the meeting.
Re/code quotes several unnamed sources "close to the project" who are generally critical of Hsieh's leadership, and they speculate as to why the changes are happening now. One said the project was bleeding money, and another said that Hsieh had made a series of poor hiring decisions.
In response to an email from Re/code, Hsieh insisted that he was never the "CEO" of the Downtown Project to begin with and declined to comment on the details. Inc.com has also reached out to Hsieh for comment, but he did not respond at the time of this story's publication.
Hsieh has been the brains behind the Downtown Project, whose principal aim is to transform the city into a bustling innovation district. Over the past three years, Hsieh has bought dozens of acres of property. The region is now home to numerous small businesses, as well as Container Park, an outdoor mall with a play area for children.
Inc. first learned about the project in 2010, when Hsieh's plans were still under wraps. He later revealed more about his ideas for the ambitious undertaking in an interview. Former Inc. contributing writer Max Chafkin profiled the project two years ago when it was in the very beginning stages. Chafkin described Hsieh's grand vision for Zappos's home town:
He sees new bars and nightclubs, hosting bands that college towns such as Austin and Athens, Georgia, would wish they had. He sees art galleries and yoga studios and bookstores and charter schools and zip lines. He sees the next great American city, sprouting up, miraculously, in the most blighted part of the most blighted city of the most blighted state in the country.
One of the anonymous critics cited in the Re/code story claims the Project has suffered from some of Hsieh's hiring decisions. "Tony is not always altogether the most wise judge of character. There's a lot of family. There's a lot of drinking buddies. And some poor choices were made," the source says.
Hsieh has gained something of a following in business circles for his hiring methods and how they helped shape the culture at Zappos. In a past interview with Inc., Hsieh emphasized the importance of establishing core values to hire and fire early on in the life of a startup. "If I could go back and do Zappos all over again, I would actually come up with our values from day one," he said.
You can watch the video below to hear more of his thoughts on how an organization should approach defining its core values.