The "issue" here is that this is an instance by friends that's growing too big. This isn't a business idea, or a platform, nor is it a venture or a company. Just like minded people who are on a shared instance. Public signups were open since it was doable. Then Twitter started crumbling (or not - I don't care) and user signups exploded.

IMO the only correct way to handle this is to close public signups to your instance or require a fee from (new?) users.

But there was no mistake on the admins part initially - they just ran a fun instance for a group of like minded people who shared interesting content to each other.