I don't know why the API terms of service were even brought up: this is obviously trademark violation. Those API terms of service are just there to give them some more immediate consequences without having to serve ISPs with legal notices and potentially go to court, as well as to leave more of a paper trail to show that the existence of their API is not them condoning people violating their trademarks.
It just really isn't that difficult for people to respect trademarks: we should not have sympathy for violations that are this blatant. HN should really not even be leaving it up, and they could themselves be served with notice (and yes: I realize that YCombinator invested in reddit; the result would just be some request in the backend); their strong and intrusive content moderation policy means they don't have any argument that "this was just user information".
(And if anyone from reddit is digging for examples of consumer confusion: when I saw "Reddit Grid" as I scrolled by, I absolutely had a first reaction of "oh, reddit is releasing a new feature to improve browsing? cool!" before remembering "oh yeah, people tend to be shitty about respecting trademarks, so watch this just be someone who wanted that official-sounding connotation".)