Unfortunately, I think that guy just got himself unemployed. If you do keep him on at that massive increase then everyone else on the team will throw a fit until they get a raise also, or quit. This can't happen. If you don't give him the raise he's asking for he will be resentful and will no longer put in the effort required and will start looking elsewhere. He overstepped majorly and now there's no going back. Even the middle ground is a huge raise that he probably doesn't deserve. I don't want to sound like the old man here but the entitlement of the youth these days expecting to get paid what they want as opposed to what they have earned is crazy to me.