Then why did they start a free service to begin with, if they knew from the start it couldn't last?
Right, to trick people into becoming dependent on the free service so they'll be reluctant to leave once the shady, UX-degrading monetization starts.
You'll forgive me if I'm not sympathetic to that business plan.
Nobody has to make a website. If the only way you can think of to make money is bait-and-switch, then you can choose to do that, or you can choose to go back to the drawing board and come up with a less unpleasant business plan. If you choose the former, don't expect me to cheer because you found a way to make money, and you think that's the only thing that matters.
Also, I don't think you're going to make everyone happy as a business, and that's (probably) okay.
For example, they may have hoped or believed they could find a better business model over time, an alternative to the traditional ad models. Based on watching their various experiments since the day they got started, I can say for a fact they did try other things (two examples: Imgur as a service via paid API and Imgur Pro accounts).
Is it more likely the Imgur founder was naive or malevolent? The answer is extremely obvious.
I can be sympathetic to the fact that their previous 'business model' wasn't financially viable while still being annoyed that they've changed it.
While we're at it, let's demand the end of free TV, free email providers, free forums, and even youtube.
If you have a sustainable business model for such a thing, knock yourself out.
If you're just making it free for a couple of years to suck people in before you ratchet up the (not necessarily monetary) cost then yeah, we can do without that.
It's an image hosting service.
You upload cat pictures, you pass the link around. That's it.
Once the hosting service stops being a hosting service, you move on and upload the picture somewhere else.