1.
Middle Man:
Imagine that I am an apple farmer and that you want an apple. You could come to my farm and buy an apple. (That's probably inconvenient, but you could do it.)
I could sell apples to a store and then you could buy the apples from the store. The store is now a "middle man," because it is in the middle of the transaction from the original seller to the final buyer.
If I sold the apple to the store, and then the store sold the apple to a neighborhood apple seller who comes right to your house and then you bought the apple from the apple seller, there are two middle men (the store and the neighborhood seller).
Each middle man is going to want to make some money, so the apple you buy from the neighborhood seller is going to be more expensive than the one you buy from the store which would be more expensive than the one you buy from the farmer.
"Cut out the middle man" is an expression that means 'buy closer to the original source of the product' (in my example, go to the farm) usually to save money. In the US, that is usually considered a positive thing.
In this example, though, he's not cutting out a middle man, he's becoming a middle man. And he's stealing. It's funny because he is trying to use a positive phrase to justify a very bad action.