On a positive note, all they have done is threaten to cancel your account, not just automatically doing it. Looking at their side, you have been caught selling tickets and now they have reason to believe you are doing it again.
I think lewisc has the best advice, check and see if anyone you gave the tickets to has possibly given them to someone else, or has sold them. Maybe they haven't, but as he pointed out the ticket use might look suspicious, and since you were caught before they are watching your awards a little closer.
Over the years I have given away a lot of Southwest tickets. Years ago when they were the paper tickets I would give them to people who had funerals or family emergencies and needed a ticket on the next flight out. Before you could extend them I once gave one as a tip to the parking shuttle guy. I saw he went to Phoenix over the weekend.
It is a lot harder to do this now with the way the award tickets are electronic. It can be a pain to redeem one because of the way the airlines have to protect themselves against improper use. While I understand this my experience has been it is a bit more difficult to book a ticket for someone who does not share your last name, or when the travel doesn't originate or end in the city where the member lives. In those situtions I found it best to make all the arrangments, and just give the confirmation code to them. Downside is you have to make any changes.
If it were me, I'd check to see if possibly the tickets you gave away might have been sold. If they haven't, or even if they have been, I would send a letter via US Mail explaining what happened, or didn't happen, and how you know the tickets are never to be sold, and you aren't doing that, provided you aren't.
Southwest people are reasonable, and I think they will act fairly. It looks like something looks suspicious to them, but had they been certain they would have closed your account. Give them a non emotional, non threatening response and I would bet everything will get worked out.
I know I don't treat award tickets as valuable as they are, or at least as valuable to the airline in potential lost revenue. I don't fly them as much as I did in the past when I gave them away all the time, but I still get them.
In these economic times there might be a temptation for someone who received some free tickets to sell them instead of taking a family vacation. I hope I am never in a situation where I might look at my award tickets as a source of revenue. However if you had lost your job, and didn't know how you were going to pay your rent you might have a different perspective.