This is why banking regulation and licensing exists. It's also well understood that a bank will do this with your money, while a regular custodian should not.
If he'd made it clear upfront that the funds would be loaned to a risky business venture, with no reward, and people still chose to trust him with money then arguably that would be fine from a moral standpoint, but he didn't, and I'm sure he didn't because he knew nobody would have agreed to it.
If he'd made it clear upfront that the funds would be loaned to a risky business venture, with no reward, and people still chose to trust him with money then arguably that would be fine from a moral standpoint, but he didn't, and I'm sure he didn't because he knew nobody would have agreed to it.