It's not shady if you were made aware of it, were not misled in any way, and you voluntarily agreed to it. You have no complaint when you get exactly what you agreed to get.
Although it is immaterial, Mike just so happens to have a number of good reasons for this policy which were already laid out in the thread. I know you don't agree that they are good reasons, but they are. But again, it doesn't matter because if you voluntarily agree to it, and you get what you agreed to, then there is no legitimate complaint because you got exactly what you agreed to get.
Now if your agreement was specifically "I agree that I won't get a refund only if you don't replace me on the bracket with someone else", or if your agreement was "I agree that I won't get a refund only if you spend my forfeited $200 in a certain way", and then he doesn't honor that, then you have a legitimate gripe because he didn't honor part of your agreement. You don't get to have a say in things after the fact outside of what you contracted for though. If there were no agreed stipulations as to what he would have to do with the now empty spot on the bracket, or with what he would have to do with the forfeited entry money, then it isn't any of your business what he chooses to do regarding those things as it was never a part of the agreement or even the discussion. If they were important, then you should have included them in your agreement with him but since you didn't you have no right to now expect things that were never part of the deal.