I don't think "shenanigans" is the right word to use here. At least on FT, that term's taken on a special meaning, to refer to gate agents or FAs who violate the rules by overriding the upgrade or standby list or giving a freebie upgrade to a friend. When I clicked this thread, I assumed the issue would be that a non-rev had been given your upgrade.

In this case, it's a possibly rude non-rev who asked to take an unoccupied seat. Not good form, but this may not be a rule violation (I think, though I'm not sure, that the only prohibition is asking a passenger to give up their assigned seat). And, even if the non-rev did break the rules, there's a big difference between asking to take another seat in coach and stealing a paying passenger's rightful upgrade.

Long story short, this isn't the sort of serious malfeasance that "shenanigans" implies.