Let's try a side story: Let's say I made a deposit, saved the Letter of Guarantee, and got the note's private key. I safely stored the private key offline.
Then, my computer got compromised, and someone gained access to my empty wallet and the LoG. That person now has the same information stormbounty has, right? He can sign a message from the address used to deposit, and thus prove that "he" paid the address in the LoG. If that's the case, he should not get the money that belongs to my note to which I have the private key. If I'd come back 2 years later and see the money's gone, you'll get a scam accusation.
That is a possible scenario in theory (your assumptions are correct in regards to how the mixer works), but it's a matter of how likely would that happen.? a compromised PC doesn't automatically mean a compromised wallet, how likely it is that someone will secure Whirlwind's note but not their actual
BTC wallet? very unlikely if you ask me.
People should really learn to keep the private keys safe. That's all that matters in crypto, if you lose your private key, your money is gone
I agree with this, and I believe, most people would, but the concept of Whirlwind is rather new, people can make mistakes, and what stormbounty told as a story sounds very reasonable (whether it's true or not) it's bound to happen to other users in the future, what happens when thousands of people start using the platform and many of them face a similar issue, ya, it's easy to tell them "sorry, we can't do nothing about it", but then think of all the efforts those people would put into ruining your reputation.
There is no perfect solution, but one is likely better than the other, I believe as long as you can help your clients fix their mistakes -- you should do so, at a reasonable fee that would justify your effort and time, there should be a redline of when you have to dismiss such cases, I believe proof of ownership of the sending address + the letter of guarantee should be the minimum requirements for any kind of refund, anyone who can't provide both shouldn't be served.
Also, depending on the size of the funds in question, some cases could be dismissed right away, I mean if Whirlwind thinks it costs $50 to go through all the evidence and the deposit is $30, they can deny the request. (this is common in some centralized exchanges).