"Unless, that is, I agree to work on a comparable solution for the university focused on solving the underlying problem I was building HuskySwap for. They would presumably own the IP and were clear that I wouldn’t be compensated. But it was implied that they would then remove the hold, allowing me to graduate."

Sue the ever living hell out of them. They are forcing you to work for them unpaid. Call multiple labor boards and drag them into UW immediately.