The KYC requirements is mentioned in the casino terms.
Sorry, but I'm sick and tired by the number of fishy things done by various services in the name of KYC.
I don't say that OP situation is crystal clear. It isn't. But the casino behavior is also questionable.
Cloudbet hasn't mentioned anything about the usage of VPN in their terms, but it is better to avoid the usage of VPN in a licensed casino where some country restrictions are placed.
The problem arises when you use a VPN with an IP address from a restricted country. If that happens, the casino can ask why you are doing that and if you have something to hide. You might just be interested in protecting your own privacy (a legit reason), or you could be using multiple accounts or be located in a country banned from the casino. So you are using the VPN to get around that ban.
If VPN is not disallowed explicitly, it can be considered allowed. Of course, if it's used for abuse, it's a completely different story.
Now, I've seen that "one of my accounts" wording and it can be seen as "one of my Cloudbet accounts" (which is abuse) or "one my gambling accounts" (may be one at Cloudbet and one at Bitsler).
Since Cloudbet didn't bother to come and show a minimum evidence that OP is cheating... why should I assume that?
This case has many whats and ifs. Both parties are like two opposing armies who have each other at gunpoint. But no one is shooting or negotiating the terms to lay down the weapons.
Well said.
It's odd that the casino did come to say a word. If they would have clear evidence of anything bad, they could clear their name easily. Also paying that small amount is an option.
The fact they don't do any move rise a question imho about how much they care about their customers.