The client can agree to a ridiculous rate, but actually collecting is a whole different story. My gut says clients with red flags like this will be exceptionally difficult to collect from.
You could perhaps deal with it by insisting on being paid up front. But then I'd worry about the potential for lawsuits, if the client really is that crazy, and that's a potentially unlimited downside you can't work around with higher rates. The more he's able to pay you, the more he's able to pay his lawyers when he sues you.