Since you've never met this person in real life, I would say you have nothing to feel guilty about severing ties with him. This seems like a volatile relationship anyway, and I'm sure as much as you wanted to help you're probably now at your wits end.

It's really up to you as to what you really want to do about him, but I think for your sanity's sake, you should think about what you are getting out of this. If you can't think of anything, then you know.