It's not a "Verification Badge", it's a "Famous Person" badge. If you verify someone's identity, John Doe indeed controls the instagram account with his face and name, then I don't see how there could be anything fraudulent about it if it's just a "verification badge".
The verification badge is supposed to show whether the person that operates an IG account is really that person, so why does a persons public image have any bearing on that? The DMV isn't going to issue you an License, then call you a month later saying "hey we suspended your license, no one's heard of you".
But we all know that badge is just a "Famous" badge. If we think of it that way then yeah, Meta was in the right because those accounts were fraudulent, because the person did not actually famous.
I realize these badges can lead to potentially lucrative brand deals. But how sad does your life have to be if you're dumping all this money and time to having a blue checkmark next to your name.