Based on my reading of the story the employer bought loyalty points with dollar points. How did they obtain them in your reading?

I don't think it matters how they're obtained. What is the value/meaning of a loyalty point if it can't be substituted with a dollar point? Either they only come in to play when you have an offer for exactly the same dollar value (after transfer costs), as a tie breaker of sorts, or they are eventually going to be valued at some dollar amount. i.e. this new employer is offering an additional $10 (after transfer costs) but I'm more loyal to my current employer.