An ethical quandary of sorts

I've been doing some web development and design work with some friends for some extra cash.

Recently we got an offer to do a teeny bit of consulting with a small company developing ios apps. We get to meet everyone and two things become apparent

1) The business is going to fail horribly and make little to no money.

2) The business owner is paying his lead developer about 5 dollars more than minimum wage. The developer(who has a BS and MS in CS and an MBA) is okay with this because he doesn't think hes good enough to work for a better company. I suspect his boss reinforces this.

I talked to the developer in question outside in the hall afterwards and asked him if he'd interviewed anywhere else. I also offered him a chance to work with us (off hours) on the weekends if he wanted, for a lot more money. The business owner apparently grilled him about it because this evening we got an email from the boss telling us that we can't speak to any of his employees again without his permission.

I know this isn't the sort of thing that is normally posted to r/webdev but I figured I'd post it here anyways. Has anyone here ever been in a situation like this? Did I overstep my boundaries? should I mind my own business? Or am I right in thinking what this businessman is doing is really wrong?