You already know my opinion but here is some reasoning.

Making false claims about escrow (or pretending to be an escrow, whichever way you want to look at it) - type 1 flag, because it creates a false sense of security for potential customers, and shows intent to deceive.

If there were no claims about escrow then perhaps regular red trust would be appropriate. The perp is quite unstable but seems to have some other business going on so I'd be willing to give him the benefit of the doubt.

Just being a general timelord, attacking people erratically, accusing random users of being alts of each other, threatening with bans, etc - neutral feedback.

You can obviously argue that even the escrow stuff is just spy100 being an idiot and I think it's fine to oppose the flag based on that.