IMO a marketplace ban at the very least. He shouldn't be allowed to sell on here given that he has difficulty knowing when ripping someone off or not. Full ban might be a tad harsh; not sure. I know that if I was scamming people (obviously it would be knowingly as I am not mentally disadvantaged), if I got caught I would expect a full ban from the site.
I believe it was right, and if it ever happened with another established member I'd expect the same treatment. Nothing to feel guilty about, it's pretty much as Cooleo said. Look at it this way, he may be back in like five years or something from now and be accepted again. I've seen it happen in the NES community with a former re-sealer who was sent to jail or the like and disappeared for a good while.
This. If he was a joe nobody he'd be banned on the spot without even a thought. I don't mind taking time to find out the truth, but in this case it was pretty clear cut.