It is the exposing the information he gave you that caused the damages. In conjunction with your not following through on what you said you would do causes the flag the person could create to be valid.
Perhaps the flag will be valid. However, who is going to support it? In order for the banner and the warning to display for a person, 3 people on their trust list have to support it. I certainly do not see 3 DT1 and DT2 members supporting such a flag. Perhaps the account sellers/farmers can get together and create their own trust network.

Im sure there are at least three people in DT willing to support a flag for someone who was harmed, even if the underlying business they are involved in is not well liked.
If someone can break their agreements with someone who is unpopular, the trust system would be pretty pointless, and would be nothing other than a popularity contest.