It's bad PR with your core demographic.
There was no malicious intent from those comments - and he's done you a favour.
If his account doesn't get reinstated - Github has become something I didn't think it would whilst the founders were still in the business.
(Note: as far as your enterprise or big-corp clients, you probably did the right thing, because that is what they would have done and that is what they expected. So if they are the clients who put bread on your table, then you have acted correctly)
What I think you could have done better (and I speak as a developer not a corporate client): issue a public note saying something to the effect of "Thanks for finding this out, maybe you'd like to interview with us. But please, everyone, do not do it this way, this is against TOS and most likely illegal. Here is is the email where to report these things and we will make sure to give you full credit after we fix the problem".
Did github run over your dog or something?
This was really the worst option: you've taught a kid to keep his mouth shut next time he finds a hole. It will be much safer for him to sell it on the black market for a quick buck.
I know security is always a trade-off, but when your largest and most famous testimonials, with all their mad skillz and street cred, still manage to get it so spectacularly wrong, it's clear that the core engine is as guilty as any other component.
The user has a flag to secure by default, I personally think that is enough. https://github.com/rails/rails/issues/5228#issuecomment-4300...
In other words, Rails actually does have a flag to make the mass assignment feature secure by default. But this flag defaults to 'false'.
I see why you'd want to suspend his account while you are fixing the hole. And I can see that it sucks that you got caught in the crossfire. And that reporting the bug quietly instead of announcing it to the whole world would cause much less headache.
OTOH after reading the rails bug report I think that homakov's only option was to make a high profile demonstration and basically shame the Rails devs into fixing it. I realize that it's incredibly shitty for you, but I'm afraid they'd just write it off if he kept it quiet.