I think they can and did make an argument that it IS a ToS violation. I think it's a stupid rule, but it looks like they changed their policy regarding sharing of accounts. I agree that the payment is what got you flagged, but once they looked at you, they saw the ToS thing. Again, I personally see nothing wrong with sharing accounts if that's your thing, but I can see them interpreting the rules to say that sharing accounts is a ToS violation. It just depends on if you want to be really strict and use a "letter of the law" reading.
The bigger issue is if they want to say that you can't share accounts, then the enforcement is not evenhanded at all. They seem to loosely enforce the rules until they don't. When they DO enforce them, they crucify you.
I think you certainly got a raw deal. They are ENTIRELY justified in screwing you, but that doesn't really make it a good decision. But then again, according to the ToS, they can ban anyone for any reason. They don't have to tell you why.