"Legally hazy" is still a terrible overview.
The guy readily admits he's using public APIs to pull files. Do I think he's violating Terms of Service by leeching content this way? Absolutely! It may not be "throw him in cuffs" kind of rule/law breaking, but I do feel that he's relying on loopholes that were not intended when rights holders and service providers (ex: YouTube) allowed the YouTube API to function.
Also, the developer claims that the service will allow "editing of audio" and that opens a whole new dimension of violating copyright by creating derivative works. Even if they're not saved, they're being "performed" when the sound comes out of the speakers.
I'm really, really big on wanting to see copyright reformed and updated to suit modern technology and user habits. Absolutely! But this guy over here says the only reason he created the service was because Pandora didn't work one weekend and he didn't like Spotify's ads. What a cheap, selfish little person.