An Iwaki pump is not self-priming...... it will not pull an un-primed air suction the way you have it set up. Also, running it dry like that in an attempt to draw water can, and may have, damaged the impellor.
You either need to have a way to prime it, or drill the side of the sump at the bottom to give it a direct water supply (recommended).
Wanna calculate the cost of that new reef tank?? Take your worst nightmare, double it, and you're halfway there.