Am I wrong for cancelling the sale of my project car to a buddy after finding out he was flipping it?

I had a 2004 BMW E46 sitting in my garage for about three years. It was a project car I bought with the intention of rebuilding the subframe and fixing up the body, but between my main job and lack of spare time, it just ended up collecting dust. A guy I know from a local mechanics group, let us call him Dan, reached out to me a month ago asking if I was ever going to part with it.

Dan kept telling me how he wanted a track car to build with his younger brother and how they were tight on cash. I felt a bit nostalgic about the car and genuinely wanted to see it go to a good home where someone would put in the wrench time. The market value for those in decent shape is around 7k, but I agreed to sell it to him for 3k under the explicit understanding that he was taking on a rust project for personal use.

We signed a basic bill of sale, he gave me a 500 dollar cash deposit, and we agreed he would bring a trailer to pick up the car and pay the remaining 2,500 the following Saturday.

Two days before the pickup, a mutual friend sent me a link to a Facebook Marketplace listing. Dan had posted my exact car using photos he took in my driveway during his visit, listing it for 7,500 as a "clean restoration candidate." He did not even bother towing it to his own place first.

I was furious. I texted him immediately, sent him the screenshot of his own listing, and told him the deal was off and that I was refunding his deposit via Zelle. He went off on me, saying a deal is a deal, that I signed the bill of sale, and that what he does with his assets after paying a deposit is none of my business. He is now threatening to take me to small claims court for breach of contract and claims I owe him the potential profit he lost.

My friends are split. Some say I was naive for selling under market value and should have just honored the price, while others think he acted in bad faith by exploiting my goodwill. Am I wrong for pulling the plug?