A couple of things.
1. It appears that Hoback failed to label his products as required by law. I doubt that will ever matter.
2. Whether or not what Hoback did was illegal is really irrelevant to us here on BladeForums, other than those who like to argue about dumb stuff. Just because something is legal doesn't make it moral, and just because something is legal or moral, doesn't make it good business practice.
What Strider does to unsuspecting pieces of steel is neither illegal nor immoral, but it sure as hell isn't the sort of thing that makes me want to buy his product. Hoback admits that he didn't take steps to correct the provenance of his knives, and lied either tacitly or implicitly. Finding that out, a lot of people now regret purchases, and are stating that they will not purchase in the future.
Whether legal or not, or moral or not, Hoback's decisions were not good business practice.