If true, it is definitely the worst way to do. It doesn't take into account any circumstantial evidence that could explain the use of such an IP address (vacation, VPN, BGP or a mistake in the geolocation data used) and Slack doesn't seem to offer any way to appeal or even inform other users about what happened to their contacts.
Slack should offer a configurable notification that could contain other contact methods to the banned user. Slack could also give those users at least sth like 48 hours to inform their contacts about what is going to happen. And it could offer banned users a downloadable archive of all content created to make sure no data is lost.
But the way Slack is doing it right now means that you can't trust them and one should really think about relying on their services in the future.
I am still on IRC and XMPP (Jabber) for good reasons ;)