$28,739 isn't a lot of money to hire programmers to work over any reasonable amount of time. This hardly seems surprising.
Also, unless somehow agreed otherwise the creators still keep copyright in things funded through kickstarter, so he could promise perecentage of future returns along with immediate payment (it's not clear from the article that he did, but he certainly could have.)
He could not offer financial returns to the kickstarter backers. That would definitely violate the terms of service (though I don't see a way it would be otherwise illegal, assuming no fraud or deliberate money laundering was involved.)
It's not entirely surprising that the engineers left to go back to jobs that pay a livable wage.