That should be illegal in my opinion, that's akin to someone just stealing your money outright not going to lie, at least give them their money back if there's nothing violated that has something to do with the money. A lot of gaming websites have been comfortable with doing this kind of thing to their bad clients and I don't think that this punishment is just not right. The punishment should be an account ban or banishment from the establishment or website, taking away the money is tad bit too far in my book.

As much as that's the best thing to do, not everyone reads the terms and conditions and it's not like those people are actively trying to game the system so why punish them so harshly when there's more appropriate and just measures available?