SatoshiDice asks you for a client seed, and then adds it to their server seed, modulos it by some number to generate the roll result. Instead of picking a positive client seed, someone picked a negative client seed, which invalidates the scheme as it shifts down the range. If the seed is negative enough, the roll will even be negative. Negative is less than any target, so the bet always won.

In short, SatoshiDice didn't validate the client seed, which their scheme requires it to do.