There's more to this - Wikiless was an unmodified passthrough proxy that iirc just unloaded a bunch of regular mediawiki JS because the author thought it constituted a privacy violation/they were afraid that for some reason the WMF was tracking them for malicious purposes[0].

On its own, not harmful. That being said, it ran afoul of the WMFs trademarks and was actively confusing people with regular Mediawiki, which is likely what prompted the takedown. You can read the ins and outs on Wikipedias own page about mirrors and forks, there's an explanation listed there[1].

Codeberg likely complied because if you're weighting a vaguely conspiratorial-minded (the developer of Wikiless is a "feds in the walls" type if it wasn't obvious from the previous paragraph) proxy tool against possibly being shut down since you decided to stand up for an easy trademark violation, the choice is easy.

[0]: I'd like to note that as far as I can tell, no such tooling exists on Wikipedia, nor does the WMF employ the usual culprit (ad networks) of that kind of nonsense.

[1]: https://en.wikipedia.org/wiki/Wikipedia:Mirrors_and_forks/VW...