Thank you for your email, which has been escalated to me for response.
1 - are the account balances of these cheats confiscated by stars?
Yes, they were.
1a - in general, does stars confiscate the account balances of cheats who
have been caught?
In cases where confiscations are appropriate, yes we do. In this case it was appropriate.
2 - if so, what happens to the confiscated balances of cheating players?
Confiscated funds are used to compensate those that are harmed by collusion. In this particular case, the confiscated funds were insufficient to compensate players appropriately, so PokerStars contributed funds to the distribution pool from our own resources.
The fact that I am in profit against these players is irrelevant, their
very presence at the tables has cost me money.
In tournaments this would be more true than it is in ring games. In ring games every hand is a completely separate event, not having been affected by the hands before it, and not affecting the hands after it. Each hand needs to be weighed individually for effect, if any. This is what we did.
Harmed players were compensated.