Its not about countering with another regulation.

The reg you site clearly doesn't apply as it it requires a licensee to have a plan for the destruction of obsolete chips.

There might be a statute he violated, I don't know, I haven't found one (possibly the Hobby Protection Act). Of course if he was selling these without disclosure it would appear to be a fraud or larceny as well.

My point is that you seem so certain of criminalty to the point where you are calling for the club to refer the matter to law enforcement and give up its own investigation. You've gone so far as to claim that there is a confession sufficient for criminal prosecution.

But you can't say what law it is that he supposedly violated.