That is a tough one. You have to do what you believe and feel in your heart is best. It is hard not to be jaded when you have been taken advantage of, however human compassion and doing what you think is right and you can live with is what it is all about.
Maybe if you tell him that he needs to give you the money...now and then let him finish the job...w/supervision? My one thing I would definitely suggest is to protect yourself a bit more... only let people work supervised, maybe look for people who are insured or bonded only.
Do what you feel in your heart. I know it might seem like you are letting him get away with something or rescuing him.... and maybe it's my codie tendencies that are making me see it another way. Should you decide that you have to contact the police, then do it. Do what you feel is best.
Not sure I was much help. !!!