What's your opinion on how we should proceed with those funds (38BTC). We can confiscate them (and add them to investors bankroll, I do not need his money) as he clearly broke our rules and we are able to do this. However considering that we didn't lose any money to him that's a bit harsh, still, I'm not sure whether we should release or confiscate it as I have concerns about how legit those funds are.
A player deposited to your site and won, and you're asking whether it's OK to confiscate his winnings or not?
On what grounds would you think that might be OK to do? Are you thinking he cheated in some way?
If he won fairly then I don't see what right you have to take someone else's money.
Perhaps there's more to the story than I'm seeing here. He tried and failed to log in as you on your dice site, OK. I'm sure people try to log in as me all the time. I don't confiscate their money for it though.
I guess if you have proof that he has stolen from people you could feel justified in using his funds to repay his victims, and then return the rest to him. But running an HYIP isn't the same as stealing, especially if the terms of the HYIP were clearly stated up front.