1 - I find great humor in people getting annoyed over this. Most people on this board didn't pay for the status they have (their employers did). Why do you care how someone else might get the same title?

2 - If this is against the contract, the airline is free to seek whatever action they see fit against the member(s). That would be matter for civil (not criminal) court. "Furthering illegal activity" seems a bit of a stretch.