"We are working hard to ensure marginalised communities aren't defined by a single story. So we have Sex Education, Orange Is The New Black, Control Z, Hannah Gadsby and Dave Chappelle all on Netflix. Key to this is increasing diversity on the content team itself," the memo from Mr Sarandos read.
Gadsby, originally from Tasmania, has two comedy specials on Netflix which look into homophobia, sexism, and gendered violence. Between them, she received five Emmy nominations.
However, she was having none of it and came back with a fiery response of her own after being lumped in with Chapelle.
"Hey Ted Sarandos! Just a quick note to let you know that I would prefer if you didn't drag my name into your mess," Ms Gadsby said on Instagram.
"Now I have to deal with even more of the hate and anger that Dave Chappelle's fans like to unleash on me every time Dave gets 20 million dollars to process his emotionally stunted partial world view.
"You didn't pay me nearly enough to deal with the real world consequences of the hate speech dog whistling you refuse to acknowledge, Ted.
"F*** you and your amoral algorithm cult … I do sh*ts with more back bone than you.
"That's just a joke! I definitely didn't cross a line because you just told the world there isn't one."
Her savage remarks have already evoked quite a response from fans, with 50,000 likes.
The New York Times said Gadsby "is the most prominent entertainer" to go up against Netflix over this controversy.
Sarandos has stood by American stand-up Chapelle since 'The Chaser' aired on October 5, saying in another staff memo three days after the release: "Chappelle is one of the most popular stand-up comedians today, and we have a longstanding deal with him."
Sarandos continued his email, addressing "where we draw the line on hate.
"We don't allow titles on Netflix that are designed to incite hate or violence, and we don't believe The Closer crosses that line … Some people find the art of stand-up to be mean-spirited but our members enjoy it, and it's an important part of our content offering."
Among others to criticise Chappelle's special is Jaclyn Moore, a trans writer and co-showrunner on Netflix's Dear White People.
Moore said she would no longer work with Netflix because of The Closer's "blatantly and dangerously transphobic content".
Moore told The Hollywood Reporter, " (Chappelle) says, 'Please stop punching down.' I don't know in what world trans women control the universe because from where I'm sitting, Dave Chappelle has all the specials, all the money, all the things. I just want my friends to not get killed."
