Because you cheated in the freeroll and cheaters have ALL of their accounts seized? Why would you think that it was OK to cheat in a freeroll?
It is definitely not ok to cheat in freerolls. But, freezing ALL the funds a little too big of an outcome of the situation. If it was a normal tournament then it would be fine. But cheating for 1 chip, and getting account frozen, is a bit of a long stretch. Seals, should probably, just ban him from playing, and return the funds.