Shadow bans do have their uses, particularly with regards to bots.
Bots that get shadowbanned never notice. They will spam or do whatever they were doing, but nobody else has to interact with them. The bot thinks it is succeeding at whatever it is doing, and will quietly keep on doing that while everybody else ignores the bot. The site admins are happy because the bot damage is contained. The bot maker is happy because they think their bot is hitting the world with their spam. The bot is happy because it never gets error messages as it spews across the Internet. Everybody is happy.
Malicious users leave destruction in their wake, so shadow bans are potentially dangerous. Giving them a shadow ban when it works as intended can help them feel like they are doing their destructive thing, but nobody notices or cares. They do their malice, they think they succeeded because they see their damage; they move on to another activity yet the site is unaffected by their apparent attack. But sometimes a shadow ban on a malicious user can backfire spectacularly since they want revenge, so they'll continue to attack and do malicious things. Done well, an automatic shadow ban on these malicious people will get bored and move on. Done badly and it just becomes more ammunition for attacks.
Shadow bans are a problem when regular folk trip over the alarms, but that is fairly rare. Good systems allow sysadmins to remove the issue and return the person to a normal state. That's an unfortunate side effect since some innocent people will be shut out of the site. But fortunately web sites that use it are not life-critical, people don't die because their account is shadow banned. Some won't notice because they're once-and-done visitors. Others may wonder why people are ignoring them, then move on. Many will contact the admins and ask what is wrong, and it will be quickly corrected.
Good systems will also have humans review the bans to make sure they were proper. Seems that didn't happen in this case, but it should happen to prevent real people from getting swept away.