Agreed. You've have quite a list of arguments defending the researcher when only his track record should have been enough to prove his good will. Despite the landslide of evidence of good will, Facebook decided to act in bad faith. Unacceptable, I hope other researchers read and remember this story.
Not even one attempt to talk to the guy like an adult about what he was doing? You couldn't even be bothered to say anything?
You'd be amazed how a polite reply to the effect of, "thanks, you've proven your point, and we are getting a little uncomfortable with where this is headed" might have solved all of this. If he ignored you and kept hacking after that, by all means steamroll him, but if you don't even have that much respect for your peers, I'm not sure why you bother with the bounty program.