If I were the CEO in this position, I would make sure the intern had shares/stock options as part of their comp, and my reply would be:
"Hi X,. It looks like a very cool project, but I'm slightly concerned that it's existence could hurt repl.it. And as shareholders, that could hurt both of us.
Let me know if you want a video call to discuss further.
Well that's a poor move on the CEOs side... Everyone who interacts with the company in any form should have some tiny amount of equity if legally possible, and some of it should be unvested, options, or restricted from sale.