They're not based in the US so it's not outside the realm of possibilities they are stupid and setup this entire thing to raid a ton of BTCs.

This might be good for crypto LONG term, but you're talking about more than year before this kind of stink is wiped from the arena.  Exchanges will crash and die if this all blows up, people will be skeptical of crypto in general, more calls for regulation will sound across the countries, and it'll have a depressive effect on the whole market in general.