Would love to sympathize but I can’t agree with their “neighbour” analogy. A more apt analogy is this: If someone has illegal dealings in the past, and you conduct business with them in the present, the authorities are well within their rights to investigate you. If you didn’t know beforehand, the investigation should convince you to cease further activities. If you did know and still proceeded, it’s your own damn fault.
Tl;dr: Cut ties with the app developer, create a fresh google play dev account and deploy your app.
I do agree that Google’s customer support is sorely lacking. If they’re collecting 30% of every purchase, they need to hire real people to deal with these issues. That’s a big chunk of change to collect and not provide any service against.
Edit: While it’s tempting to play the victim, business in the real world also works this way. Businesses can end up tainted by association with sketchy parties or other businesses that act poorly. A good chunk of business is word of mouth and trusting the other party. No one wants to do business with someone untrustworthy.