They should have just been honest about the situation from the start: "We were caught without enough capital to settle all your trades, we are sorry and will do better next time".

Instead they made it seem like they were protecting traders and doing them a favor. They didn't have enough cash on hand to settle trades and meet the capital requirements. They messed up on that front and are in the process of fixing that with additional investment from their wealthy shareholders.

It may be too late however as everyone I know that did trade on RH is now in the process of migrating to another more established brokerage.