There is no need to have the phone in hand with the application open in order to collect location data - we get billions of signals from first party data from background usage on both iOS and Android.
These SDK's require legitimate usage of GPS in order to deliver the functions that we provide - our permission requests are overt and informational - we let users know exactly what data they will be sending and how we use it (one of our products actually rewards users for doing this!).
True, Apple and Android are both cracking down on un-authorised usage and collection of this data, it just means you have to follow some more rules in order to collect this data. Either way it is good for user transparency.
It sounds like (for the most part) he is talking about bid stream data, which everyone in the industry knows is the sewerage of the location data industry. Sure you can get a few valuable insights from it - but should it be classed as location data? No way. Even with significant cleansing it is still mostly garbage. If that is what their entire business model is based upon then no wonder it feels like a ponzi scheme to him.
For the rest of the location world who are using quality data - we see things differently!