This report coincides with reports surfacing on N4G.com (and reported elsewhere) that the "Enforcement Director for Xbox Live" Steptwo has recieved, and responded to death threats via IRC.
Modding a console will get you banned from the service, according to Microsoft's FAQ on the topic. But according to Microsoft, it's easy to avoid a ban; don't cheat:
Now you've got me scared. How can I avoid being suspended or banned?
Just follow the rules. Some people throw all social graces out the window when playing, but they need to realize that there are consequences for bad actions. If you and your team play fair, then you'll have uninterrupted gaming pleasure on Xbox Live.
Banning a console from Xbox Live will not render that console useless for playing games. However, multiplayer functions, and presumably title updates, will be unavailable to users of modded / banned consoles.
A word of advice to those buying used Xbox 360's this Holiday Season: Don't buy from someone you don't know. It's likely that several of these banned consoles will hit the used market soon.
Xbox Live has over 20 million members. Microsoft is based out of Redmond Washington.
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