Earlier quoted context omitted.
They did the same thing with closed source Pylance, which is built on top of the open source Pyright. Pretty despicable behavior no matter how you cut it.
I'm by no means in favor of closed source extensions, but I feel it's worth mentioning that yes, Pyright is open source and Pylance isn't, but Pyright is also a Microsoft project. You can hardly make the argument that keeping all parts closed source would have been better.
Nobody should be terribly surprised when a giant corporation behaves like a scumbag; it's a fundamental feature of such organizations. We as individuals have the responsibility of shunning them when they do this.