That is indeed a real f*** up. You don't, however, need to blow $500 to perform the effect. I think Eric James had a version called "Russian Roulette" available as a download, but the risks of winding up like that poor bloke is very real. This can even be performed impromptu so long as you have three bar mats, three cups, and a nail.
Derren Brown, in his TV special Russian Roulette Live, did a safe version where he had six cups and let a spectator freely select one and pour in a hefty dose of dish soap. It didn't taste very good, judging by Derren's reaction when he got a mouthful of it
If you want the safe version, though, go with the $500 version. I wouldn't particularly advise anyone to try this effect without being fully aware of the risks involved. I think it should be a law that anyone who wants to perform this must watch When Magic Tricks Go Wrong with Barry and Stuart.