I think it's great that MA makes a public example like this that cheating will get you banned and all your items sold off.
Having said that, I think they should explain what the proceeds of the auction will be used for. I say that because it's potentially a conflict of interest when the judge/jury are the ones to benefit from their decision.
If the proceeds go into an event fund used to fund in-game events that all players benefit from, then great. If the proceeds go to the banned avi's as a condition of finally settling the dispute, then great. If the proceeds will be used to step up enforcement of EULA violations, then great. If the proceeds will be used to hire another programmer or quality assurance person, then great.
But if they don't state how the funds will be used, then I'm left wondering if they aren't just going to take the funds out of the game and put them into executive bonuses, which, IMO, doesn't do much for the prosperity of the game.