I haven't had that happen to me...yet.

I wouldn't have thought that someone would be able to use your reservation as the hotel should have asked for an imprint of the CC when that person checked-in. But even as a no-show, I would think your CC would only be charged for 1 night, not all three (and my understanding is even though you would be charged, you wouldn't get night credit for the stay.) Does the $500 match what you would have been charged for staying all three nights (i.e. a nightly rate of about $125 to $150 plus taxes/fees?) Or is the $500 closer to a single night cost?

I would suggest getting on the phone and calling the hotel directly and actually talk to the GM about this rather than just using email.