"A red flag for me is the claim that Google also blocked accounts that were set for recovery which seems almost close to impossible (or insane)."

Why should that be impossible? They are clearly linked (you have to own to other account, to accept it beeing used as the recovery account of the first one).

And the intention of google is probably to fight scammers etc. - and I can imagine it disrupts them a bit, if all associated accounts get banned. So I can imagine that it is a real case ... of collateral damage

Edit: stating of how I see the situation from the perspective of google, does not mean I approve it, and neither collateral damage in general