From experience of reading the forums for years, when many of the airlines and hotel groups instigate a fraud investigation, they often do so without any customer input and make their decision without any grounds for appeal. They work to industry systems that are designed to identify and flag high risks and fraud. I think the lack of customer input is the unreasonable part, as there can and will be times where there is a reasonable explanation, which evidence could help to clear up.

The challenge is that much of the fraud originates has historically originated from China, so the systems are calibrated in a way that likely flags a particular pattern of transactions funded by a Chinese payment method. I would be surprised if Virgin are dealing with you any differently to any other flagged case of fraud and proving any sort of discrimination is likely to be extremely hard.

What you perceive to be discrimination, is via the anti-fraud software rather than Virgin. The challenge would be proving that the software is discriminatory and is unfairly targeting Chinese customers as a result of their payments (if this has driven the issue) being at a level of suspicion considerably above the actual level of fraud risk.

As for the points being the property of the issuer, yes that is correct and you will find the same language used in pretty much every points based scheme that exists. It does however seem extremely unfair to have all points taken, without at least a right to reply in defence of the account cancellation.