I am sorry, but this is so convoluted and there is so much money is at stake that if you haven't hired a lawyer by now you are certifiably insane. A couple of things are for sure, you and your business partners were a) not equipped to detect/vet a loony b) were not able to handle them c) did an ask HN in a situation that obviously calls for a lawyer. I am sorry but you are seriously lacking business skills. After this is finished you need to either learn from your mistakes or better yet put out for, and vet very very carefully from multiple references and past performance, a serious business oriented partner because this rambling post with tens of thousands of dollars at stake just screams clueless.