Kagi was a payments processor / fulfillment service provider focused particularly on shareware. Back in the days before app stores, if you were an indie developer your options for distribution and monetization were very limited. Generally you put out a demo version that took some sort of code to unlock, and users sent you money via the mail in return for unlock codes. This is how many software authors got their start in the 80s.
In the 90s, it began to become clear that accepting credit cards and providing the unlock codes online was the way to go, but for most developers actually doing that was out of reach. Not just for technical reasons, but the fees on having a CC merchant account on a low-cost, low-volume app were just not feasible. Kagi filled this niche. They would do the actual sales, in return for a cut, and provide the unlock codes to customers. You as the developer still handled all support. It was by far one of the easiest ways for a small developer to sell their software online.
I am guessing, although I don't know for sure, that they also provided some sort of libraries or implementation assistance for the 'unlocking' features inside the software itself, because many Kagi-sold apps had very similar-looking unlock codes.
Exactly what happened with the "vendor fraud situation" I don't know, but it's sad to see them go under so suddenly. They provided a valuable service for many years and there are a lot of apps that would probably never have been developed were it not for the sales channel they provided.