Turning in for too much bandwidth?!

That's a new kind of scare tactic - did he pay for a flatrate? If yes, then his ISP is trying to wiggle out of a contract they made with him - and they use scare tactics.

"We know you do something illegal, but as long as we can reap more profit from it than our contract normally allows, we'll tolerate it."

Either they are furthering criminal activity by ignoring what they know, or they are threatening him without reason. Either way they are blackmailing him to keep him from using what he paid for - and that's simply illegal.

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