Get a lawyer. And delete this. You've already admitted too much in a public area.
Also:
> I politely decided to stop working with him after finding out and hearing horror stories from mutual connections and his previous employers (lawsuits, threats, etc).
IMO this is not a valid reason to stop working with someone after the relationship began. But I suppose I don't know the whole story.
Tortious interference?
Something like spilling his guts to the hookah-smoking caterpillar . . .
The person terminated the business relationship based on anecdotal reports, and then is surprised when he catches wind of unfavorable rumors being spread about him? It's ironic that in the process of breaking up with the cofounder, this person essentially created the situation he was breaking up for.