I'm not a lawyer but have talked to a few founders who faced similar situations, ie. employee breaks the law or there's a substantial breach of ethics.

1) Document your case and speak to your lawyer. Pray they didn't do anything that would affect your customers/clients that could cause legal issues for you. I assume you're reviewing all their communications.

2) In most cases for early-stage companies, it's probably not worth it financially to pursue the case. It'll end up eating a lot of time, energy, and money that could've gone elsewhere. In the very least, documenting your case and throwing out some low-cost tactics could be useful for defensive purposes.

3) The priority at this point, I assume, is to re-establish your sales op. I would reach out to your professional networks and let them know not to work with this individual. Recruit your investors' networks as well, if any. The goal is to find good ways to protect yourself and your friends/partners.

4) Use the crisis to rally the team! You've been debuffed all this time! Turn this into a gift.

5) This sort of stuff happens all the time in one form or another. And it'll happen again. Anecdotally, I've found that it's happening more now with remote work where it's just harder to vet people. And if you're working cross-cultures, it can be even more difficult. Don't beat yourself up too much and learn from it.

Good luck!

Talk to your attorney.

Maybe focus on the competitor because they have insurance.

Going forward, maybe consider sales a job for the founders because outsourcing sales requires incentivizing solely by money and your former salesperson’s behavior is the kind of behavior common when money is the sole motivation.

Hopefully, you still have your shirt even if the sleeves are shorter.