Honestly, I have not seen a similar situation on another game mismanaged so poorly
I have. I won't get into much in terms of details, but if anyone was over there at the time, they might recognise the "Loot Rune" situation. Well, it wasn't just Loot Runes, but a whole bunch of similar runes - the ones I had were Loot Runes. (These runes were like runes used to be in Allods, fitted into slots drilled in each piece of gear. Some runes could only be fitted into weapons, some only in armour, and so on. Loot Runes gave a +% bonus to your chance to get drops when looting monsters, and gave more loot as well.)
Anyway, they had a sale on special-bonus runes like Loot III, of which I had two bought directly from their CS and a third that I bought in their AH ridiculously cheap embedded in a weapon, as if someone had fat-fingered the price or forgotten it was there. Anyway, shortly after the sale ended, someone found an exploit, shared it somewhere and a bunch of people duplicated bazillions of runes.
OK, (bad words) happens. Find out who did it, ban them, done.
But no, they did that, and
also promised to remove all special-bonus runes of III or above (the Loot rune was only available in III, as were most of the others) if they thought they were suspect. No criteria were given and the wording basically implied that if you had any at all you might be hit, and I and many others were reasonably concerned that our legitimate purchases would be taken away. Furthermore, when pressed for clarification, it became clear that if you obtained in some way a tainted rune, it would taint any others it was stacked with, maybe.
While I got out of it unscathed (I took precautions including prying the runes out of their slots), a substantial number of people were less lucky, and in all cases, when their "fix" removed runes from gear, the rune slots were removed as well, which is normally a CS purchase to recover. Their reaction to people's reactions was almost "shrug, yeah, whatever". Not actually that, but dangerously close.
The whole situation cost them a bunch of players, including me. I left not because I got hit by the situation, but because the whole thing was catastrophically badly handled, with completely opaque statements and a clear indication that their customer service policies were entirely arbitrary.
By contrast, when another game had the "Armbrace of Truth" incident, as I heard it, exploiters were banned, but an amnesty was declared on the items themselves and they remained in-game as a sort of informal auxiliary currency for player-to-player purchases above the limit for gold that characters can carry.