If you don't mind about the fees... then it's very possible. Just go ahead and transfer yourself some money using Paypal. You can get all the miles you want... at the cost of paypal merchant fee.

Your original hypothetical question will have no ethical or legal problem. It is however finanically not feasible due to the fees. Why would you want to change cash into miles? Reward miles are not considered commodity. They can be voided by the airlines at any time, using simple excuses.

Also, if you charge too much (let's say a few million $ / year)... IRS will knock on the door soon asking for audit.