In games like Diablo and Path of Exile the game is separated into two ways of playing. You can do "seasonal" or "league" play where it starts at one point, ends at another, and anything you collect during that time is either totally wiped at the end of the season/league. The other way you can play is with permanent characters. In PoE it's called "standard" but I don't know what Diablo calls it. Standard is where all of your stuff from every league/season lives. Once the league is done, your stuff goes there to live on forever. Super neat, since it gives you a long time to accumulate crazy gear.

This bug allowed people to take items from that permanent standard league and put them in the inventory of a seasonal character. This could conceivably allow someone that's leveling to have top-tier leveling items, or very high level endgame gear very early on in the season, which is competitive.

It's clear cheating, a broken-ass exploit, players have ALWAYS been banned for exploiting bugs like this (throughout the history of competitive online gaming, not just in ARPGs like D4 and PoE), and absolutely nobody that's anywhere near reasonable has an issue with bans being handed out for cheating and exploiting bugs.

This kind of bug pops up fairly regularly in every game that works like this and those acting super butthurt about it likely got banned for exploiting it and won't admit it publicly.