what does the casino do with such money after then? Do they convert the money for themselves or they have an authority they pay such money to?
I haven't heard any information or what casino does to the money of their customers that was blocked, but I believe that that the amount in that account that was blocked will be converted to theirs and withdrawn. Because the have access to peoples Casino accounts. I believe that as they can send fund to a casino they can also withdrawal fund from there site.
As soon as we deposit money into the casino, we are actively reducing our power over that money, it is like a mortgage and when we use up this money, the casino will ask for another deposit and of course, if we are violating the rules that the casino finds out, many casinos will confiscate or maybe just return a portion and the rest will be a penalty fee for the violating player. And eventually this mysterious amount will be automatically withdrawn into their budget, there may be many steps behind to make it valid but generally the casino will be the one to keep it all and the one who pays the price is the one who challenges