The only question that needs to be answered is does Stake have the right to claim a player's entire deposit in case of a breech of the TOS? And if the player undergoes KYC and it is proven that he resides in a restricted country, can he still get his deposit back or not?
Based on the TOS it will be confiscated, if they allow getting back the deposit there's a possibility of abuse, it's clearly stated that it will be confiscated, maybe he can strike a deal or ask for forgiveness, there's nothing on OP's post that he will agree to undergo a KYC but he can try what I'm suggesting.