This is rather normal on exchanges when depositing currencies on the wrong chain, ftx and Binance both have their fee if you want to recover funds that were deposited on the wrong chain.
OK, I think it'd be just good customer service to fix the problem without charging the customer for a silly error like this--but to charge $500? That's just a straight-up shitty practice, and that tells me they're willing to gouge anybody and everybody they can, because obviously they care more about $500 than they do about keeping someone using their exchange and/or about a disgruntled customer creating a black mark on their reputation like OP did.
The exchange has to access the private keys, which is not trivial. They have real expenses in attempting to recover the tokens. $500 might be excessive and there should be an option to pay out of the tokens being recovered.
Most, if not all exchanges will change a significant fee to try to recover tokens/altcoins sent to the wrong address type.