What I remember from that situation was that good items were selling in the auction house for hundreds of dollars and everyone was able to get at least excellent equipment easily with the ingame currency.
To balance the overabundance of godly equipment in the auction house they reduced the drop rates significantly. The consequence was that the game was no longer fun to play from a loot standpoint, you could go on an entire gaming session of a couple of hours and only find crap.
I have a vague idea of loot farms taking over and by the sheer number of hours played, they were basically the ones providing the best items everyone else was buying. The AH as it was along with the other rules about ownership the game had in place was turning the game into something ugly and distorted that wasn't a source of fun for most players anymore.
Once the auction house was shutdown I remember suddenly I was getting a ton of legendaries and set pieces and all kinds of good stuff every few minutes.
Yeah, it was very poorly implemented. It happened so quickly too. I remember I barely had time to play and then they were changing things, so I guess they took care of it quick, but It was just a bad roll out from the start.