If his account had been hacked then Amazon would have handled it as a hacked account. They normally will close the account, allow the person to open a new account, and give them a gift certificate so that they can repurchase their digital material. There are plenty of examples of this.
Amazon has said that the account was closed due to an abuse of the return policy. It could be that the Kindle was not broken, the return was handled wrong, or even that the Kindle in question was not legitimatly purchased.
There are people who have bought used Kindles and ended up with units that suddenly stopped working because they had been called in as stolen. Amazon normally tells folks that there is nothing that they can do in that case. What would Amazon due if said Kindle was returned in an attempt to get a new Kindle? Amazon ships the new Kindle as soon as someone calls in a problem. The broken Kindle is returned when the new Kindle arrives.
I am not saying that is what happened but something went wrong with this return. We are not getting the full story (shocking I know). Amazon doesn't randomly close accounts. I know of a good number of folks who had returned multiple broken Kindles (Screen fade with the K2 led to some folks going through 7 or more Kindles, I have read of folks who were on their fifth Kindle replacement due to improperly glued cases, broken speakers, and other issues.) None of those people had their accounts closed due to return issues.
So something went badly wrong with this return.