Earlier quoted context omitted.
Seems like he'd be a great fit. He knows what you're building, knows the codebase, and apparently works for less than you were paying for the same service before. He didn't "take part in a scheme", he was tricked into it the same way you were. He should have been getting a real pay check and not just the cut your employee was giving him.
Well, he wasn't tricked. He knew that he was performing the entire work for a full-time employee, which violates that employee's contract. My employee propositioned him and he agreed to do it. So, while his skills were great and agree that the cost would have been reasonable, the ethical choice to willingly access the confidential information of a full-time employee and prop up someone with far less technical ability…
I imagine there's a whole lot of that going on these days at companies who would never think to check for it.