Unless your contract outlined what would happen if it all crashed and burned, you're out $1k + the time and effort spent. I doubt it's even worth going after him for any kind of monetary compensation for the time he wasted. It's unethical sure, but you'll run into the same thing from time to time with "legitimate" web development companies as well.

Next time, make sure you outline or have them outline deliverable portions of the project. The deposit starts the project, but you need to see X within Y amount of time. if it's all good, continue, otherwise address the problems and define the next project deliverable. You might even need to incorporate payments after certain deliverables to keep everyone happy.