If he is paying over $500 per machine for RGB Leds, he is getting taken for a ride.

Depends... there is a HUGE difference between China LED and German LED and he could well be paying that much for all the LED's, controller etc.
German LEd is considered the best there is.. but its expensive as its done RIGHT... Chinese make affordable LED but its quality is way way below that of the European stuff.
But even then.. no guarantee that German stuff is bullet proof as with any mass produced item