When I first got on Angel.co, I had a phone interview for a software developer position at a startup that I would have moved across the country for. In that call, the guy said it was a great opportunity to get experience. I asked him what the pay was because it gave me a sinking feeling. He said it was a position to gain experience which was hugely valuable — so no pay. I was absolutely horrified then but I guess I should be grateful that he told me I wasn’t going to get paid for the work straight off.
This is partly why your story sadly doesn’t surprise me. Except for the part where people willingly gave the guy money to run the company when he was supposed to be paying them. WHAT?!