They sent their money to him. Was there a TOS stating that if you are on the black list your money will be returned? Literally all he needed to do was put up a disclaimer that if you are on the black list your bid is forfeit. Preferably including a link to easily check it, since @themarkymark runs that blacklist service and likely could do that pretty easily, perhaps with a bit of development. Dunno if there's an easy link name lookup yet. Now, of course, people could still hate him for that, but they sent the money.
Big business steals people's money all the time in similar ways. Like when people cheat at games and they're banned...or in some other way violate the TOS...in some cases hours or days after buying a brand new game.
This has now become the post-post reason I mentioned you. :P