Why exactly does lying escalate the issue and case into something that deems the balance un-returnable?
You misunderstood the analogy. We are comparing the intent of a player who simply wanted to enjoy Betcoin and made a mistake with the intent of a player who has been caught lying multiple times and continues to do so. His funds are being withheld because of fraud.
I'll make an assumption here and assume that most of the cheaters that you encounter on Betcoin will not see this thread and be encouraged to cheat should they see you return this user's funds, nor will any cheaters on your website be encouraged not to cheat. It is a poor way to make a public statement.
That is not a good assumption, from our experience. As we have stated, we still have players from 2.5 years ago when we banned this person's region who return back monthly, attempting to defraud the site. We have gained access to Discord and Telegram groups with thousands of members where the entire purpose is discussing new ways to defraud sportsbooks. We see the reactions in these groups when players start getting banned and it usually dies down for a while. However, as any member of the Bitcoin community should know, cheaters will continue trying to cheat. This is their life's work. It only takes a few times not getting caught and they are good for the year.
I think that that is what I was getting at - you are withholding this user's funds, not because purely of fraud, but because it helps you to reduce future incidents of cheating. This is
to withhold funds.