One thing that has not been mentioned is that if you decide to report him, be sure to actually have flight information.
As in, "on <this> date, he flew <this> aircraft and the weather was IFR" as opposed to "He told me he flew IFR when not IR".
It will require more legwork on your part, but it will also give you a higher chance of getting the desired response.
As to your desire to give the guy a warning, I'd have to disagree. There is no possible benefit.
1) He knows what he's doing is illegal. With him taking and failing the IR checkride there is no way he can claim he did not know he was supposed to have the IR to go fly IFR.
2) He knows that you guys know, per the OP he himself told you.
Keep in mind that if the guy does have his certificate yanked he will likely try to keep flying without it, so you may still have to report him again to keep him out of the sky afterwards.