It sucks that this happened to them, but I really don't see what the problem is. They were using copyrighted material and the owners of said material told them to stop. It may be a dick move by SE to stop them at the finish line, but it's their property, it's not like stuff like this hasn't happened before.
I remember a few years back when someone was doing a translation for Rondo of Blood and Konami notified him to stop, so the guy stopped and even stated that he understood why they told him to. Luckily he wasn't that far into the translation, but it's the same thing nonetheless.
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