The way I see this is he's using your pics (thumbs) as a "banner" promoting your site. In my POV this is no different than putting up banners to different paysites. The actual "full size" pictures that are offered on his site are bought content so he can promote whatever site he wants when using them.
Ofcourse if you don't allow your pictures to be used in self-created banners we have a problem
But I'm sure there will be much smarter people here with another POV on this