There is a longer story in which Mullenweg has claimed that WP Engine does not contribute sufficiently to the WordPress open-source project, and that the use of “WP” in their name supposedly created confusion and infringes the trademarks of the WordPress open-source project. WP Engine disputes this.
Of course the elephant in the room is that Mullenweg is the CEO of a rival for-profit WordPress host (Automattic), but has made his claims against WP Engine from his position in the open-source WordPress project.
Perhaps a board of non-Automattic WordPress project people would come to the same conclusions about WP Engine, but the current situation reeks of conflict of interest.
Ultimately the ones paying the price here are the users of WP Engine-hosted WordPress installations, who have been cut off from plug-in and theme updates with no warning.